HMRC investigate and prosecute individuals and companies that have broken tax law every day. This particular story is in the headlines because it involves a Blackburn restaurant that participated in Ramsey’s Best Restaurant in 2013. Gordon Ramsey declared Yu and You Restaurant and Bar to be the Best UK Chinese restaurant at the end of that Channel Four series.
Unfortunately, its directors Vincent Wai Kit Yu and Ching Yau Yu liquidated Kai Hing Limited in 2017. They owed £385,000 that they were unable to pay. As procedure dictates, the Insolvency Service took over the close of the business. At this point they uncovered tax issues that necessitated a more in depth investigation.
Why did insolvency lead to a tax investigation?
You are already in a pretty bad place if you are in liquidation. Unfortunately for these company directors, this process uncovered the fact that they had not been declaring their full cash takings from the start of the business. This was not a surprise to the mother and son team, as they know they had not declared over £600,000 of cash sales dated between 2011 and 2016. HMRC should have collected £120,000 in tax from this amount.
Interestingly, they continued to trade from their award winning restaurant and paid their quarterly tax returns on time. But they did not make any attempt to pay off the outstanding amount.
What are the consequences of their actions?
As company directors, they are both responsible for the proper execution of its finances and this includes paying the correct amount of tax. Therefore, they have been issued with penalties “which prevents them from becoming directly or indirectly involved in the promotion, formation or management of a company:” Vincent Yu for seven years and Ching Yu for four years.
A sombre warning to others
The Chief Investigator for the Insolvency Service, Rob Clarke, said: “This wasn’t a one-off incident where Vincent and Ching Yu failed to declare their full income as the misdemeanour sustained itself throughout the history of the company. Directors are expected to carry out their full responsibilities regardless of their role, including paying the right amount of tax. The Yus bans should serve as a warning to others that we will investigate misconduct and pursue disqualification where serious breaches of this nature occur.”
Just because its cash, doesn’t mean you can hide it from HMRC. The administration machine may be slow, but it is effective. And if you want to benefit from the role of company director you also have to take its responsibilities seriously.