Publicans are facing a massive clampdown by HM Revenue & Customs (HMRC) as it pursues the £700m-£1b it believes slips through the tax net each year.
With November's new licensing regime expected to lead to a surge in business, experts warn that pubs need to clean up their books or face stinging penalties from the newly combined tax and customs department.
Peter Davies, consultant at business advisory firm Vantis, said: "Revenue & Customs are gunning for independents that might be cutting corners to compete with the big pub groups. I have no doubt they will be looking to make very public examples of people to get their message across."
Davies warned that legitimate businesses need to make sure they have a "paper trail" for everything, including expenses, door charges and wages paid in cash, or they could face savage fines.
Although tax inspectors traditionally give notice of a visit, customs officers can turn up unannounced and demand to see the books. Davies believes they will now become the department's "shock troops", feeding information back to the Revenue.
"People understandably get nervous around the tax man. But don't rush to answer their demands - always get professional advice from your accountant first," said Davies.
Margaret Doyle, the senior business manager running the new HMRC campaign, said: "We will be working with individual pubs and the industry as a whole to help public houses pay the right tax at the right time."
Nick Bish, chief executive of the Association of Licensed Multiple Retailers, said the campaign would undoubtedly be a distraction to businesses.
"I hope that a distinction will be made between carelessness and deceit," he said. "Revenue & Customs should be prepared to help, not just enforce, with this campaign - if helping publicans is what they truly intend."
Target areas: What to do next
- Door changes: Make sure you have some sort of system, such as raffle tickets, to record how many people come in.
- Cash wages and tips: Record all wage payments and tips.
- Expenses: Ensure you have reseipts.
- Fruit machines/cigarette machines: Record income.
- Cashing cheques: If you cash cheques, you must be registered with HM Revenue & Customs.
By Chris Druce
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