When we first started acting for the restaurant chain we noted that the VAT liability had been overstated on previous VAT returns. The restaurant chain charges its customers for meals and drinks consumed plus VAT and then adds a discretionary gratuity to the bill. It was clear that this addition represented a truly discretionary gratuity and the customer was at liberty to refuse to pay it or to pay a different amount. We considered that this amount did not therefore form part of the contracted amount for the provision of the meal and was therefore not part of the consideration for the supply to the customer and not subject to VAT.
The restaurant group had been accounting for VAT based upon its gross income including this gratuity in error. The amounts involved came to over £200,000, and we were able to obtain full repayment of this amount from HMRC for our client.
We currently perform the audit and tax compliance work and also offer tax advisory.
“Ecovis Wingrave Yeats worked extremely well with the finance team causing the least amount of disruption to our everyday business as possible. While thoroughly understanding our business, they were not only technically capable but also went about the audit process in a polite and charming manner. We are always able to approach the firm with the knowledge that they will provide sound, cost effective advice or technical guidance relevant to our business. We are pleased o be working with Ecovis Wingrave Yeats and would recommend their services to others in our industry.”
Finance Director, Ed’s Easy Diner Group