A London Centric investigation reveals one of the capital's most garish gift shops owes hundreds of thousands of pounds in unpaid taxes — and uncovers its mysterious owners.
as I understand it the basic approach is to have a succession of different companies running the same shop. on paper it looks like new businesses keep setting up in the same shop unit and then going bust before another company does the same (and then another etc), even though in practice the shop stays the same. very small businesses (<£90k) don't have to charge VAT and most other taxes (e.g. business rates) are not due immediately. Each company operates for a while and then goes bankrupt before becoming liable for VAT or paying other taxes. Then a "new" company takes its place.
A simple but very effective step would be making the landlord pay the business rates rather than the tenant. It’s a good thing to do for other reasons as set out below but seems like it would help a lot in these phoenix tenant cases. Labour has said they’re going to reform business rates totally and switching from tenant to landlord should be part of that.
It would be better to create and enforce obligations on the part of the Landlords to conduct adequate DD on these tenants and ensure their premises meet certain requirements re quality of occupant, compliance with law etc. The Tenants can dissolve and reappear but the Landlords aren’t going anywhere, so should be easier to hold to account; especially if, presumably, they are getting the rents they want from the arrangement (at the expense of HMRC).
Maybe. Landlords do up to a point - but what exactly are they supposed to enforce/check? There’s no law against foreign nationals being UK company directors. And leases do require the tenant to be pay business rates and VAT. In order to evict a tenant they have to go to court. The shadow directors are the issue and how do you uncover them? That only becomes apparent later. This is something City of Westminster Council looked at doing, but landlords fill space quickly or they get hit with Westminster’s vacant property rates. Same issue on Princes St in Edinburgh but with tartan tat and American candy shops.
This is really interesting. Rents are very high round there. You’ll be able to find out by doing a (free) MapSearch at HM Land Registry (using the premises address) who owns the building and, working down via any freehold and leasehold titles, which company granted the lease to the Harry Potter shops and, therefore, who benefits from the rent. Also, whether this is an arms length letting.
My guess is that the Harry Potter lease will be less than 7 years (ie not itself registrable itself at HMLR) and they don’t pay any SDLT on the grant of the lease, so probable tax leakage for HMRC there.
Had *very* quick squiz at MapSearch. I don’t think the Coventry St or Whitehall HP shop leases are registered, so they are short term and the terms and identity of the legal tenant is opaque. No idea of the rent, but £50-£80k p/a is possible and landlords usually want to see tenant turnover of 3x annual rent before a letting or else get a hefty rent deposit, so there’s substantial cash needed here. The landlord probably elected to charge VAT on the rent, so the lack of VAT registration is interesting.
A detail that didn't make the story is the turnover of limited companies behind the constantly-trading business on Coventry Street. Since October 2022 there has been W Piccadilly Ltd, W&W Gifts Ltd, Grand Present Ltd, and now Licensed Gift Shop Ltd.
It’s bizarre that anyone can be involved in retail in such a central and expensive location so soon after relocating here? Like I can’t imagine moving to Midtown Manhattan and suddenly running a gift shop on 42nd … (or maybe it’s also happening there and it’s actually a post-Covid retail phenomenon?) It also feels like there’s a stock process here that people know to follow and is possibly well known to a specific diaspora? (Like, call this guy, get your details on CH, get a %age of sales for lending your identity etc and if anyone starts asking questions we can use ChatGPT to write our correspondences in passable legalese) …
Fortunate for the owners that the actual IP owner is too busy inhaling black mold and publishing rants about trans people than to actually take any action really.
Legitimate HP merch is largely licensed by WarnerBros and if they could track down these patsy directors there'd be a significant IP infringement claim. I've just sent this to a friend in their legal team.
Great investigation, but "The missing business rates owed to Westminster council could help it fund repairs to the ageing council housing London Centric has reported on..." is not accurate. Council housing, and its repairs are funded by the ring-fenced Housing Revenue Account, not the general council budget. However, the business rates could be used for a myriad of other things, including the support and promotion of small businesses.
Top work! The contrast between Oxford Street, which I walked down yesterday, and Vienna's (pedestrianised) Rotenturmstraße, which I walked down the previous day, could hardly be greater. In the comparison, central London is a dump.
We have two “cafes” on our street (Seymour Place), one that pretended it would open for a couple of years and is lying dormant with its fixtures and fittings all still inside. There’s an eviction notice on the door that’s been there for a very long time. There’s another just set up a couple months ago on the corner of Crawford St in a shop that’s changed over hands several times. This one has the same style of decor as the non-cafe, menus up to make it look like some kind of juice bar. Never going to open…
Journalism lives. Thank Heavens!
Great piece of reporting!!
What I don't understand and would love more context on is, how do these businesses get away with not paying tax?
as I understand it the basic approach is to have a succession of different companies running the same shop. on paper it looks like new businesses keep setting up in the same shop unit and then going bust before another company does the same (and then another etc), even though in practice the shop stays the same. very small businesses (<£90k) don't have to charge VAT and most other taxes (e.g. business rates) are not due immediately. Each company operates for a while and then goes bankrupt before becoming liable for VAT or paying other taxes. Then a "new" company takes its place.
A simple but very effective step would be making the landlord pay the business rates rather than the tenant. It’s a good thing to do for other reasons as set out below but seems like it would help a lot in these phoenix tenant cases. Labour has said they’re going to reform business rates totally and switching from tenant to landlord should be part of that.
https://www.centreforcities.org/publication/reforming-business-rates-fixing-a-broken-system/
It would be better to create and enforce obligations on the part of the Landlords to conduct adequate DD on these tenants and ensure their premises meet certain requirements re quality of occupant, compliance with law etc. The Tenants can dissolve and reappear but the Landlords aren’t going anywhere, so should be easier to hold to account; especially if, presumably, they are getting the rents they want from the arrangement (at the expense of HMRC).
Maybe. Landlords do up to a point - but what exactly are they supposed to enforce/check? There’s no law against foreign nationals being UK company directors. And leases do require the tenant to be pay business rates and VAT. In order to evict a tenant they have to go to court. The shadow directors are the issue and how do you uncover them? That only becomes apparent later. This is something City of Westminster Council looked at doing, but landlords fill space quickly or they get hit with Westminster’s vacant property rates. Same issue on Princes St in Edinburgh but with tartan tat and American candy shops.
This is really interesting. Rents are very high round there. You’ll be able to find out by doing a (free) MapSearch at HM Land Registry (using the premises address) who owns the building and, working down via any freehold and leasehold titles, which company granted the lease to the Harry Potter shops and, therefore, who benefits from the rent. Also, whether this is an arms length letting.
My guess is that the Harry Potter lease will be less than 7 years (ie not itself registrable itself at HMLR) and they don’t pay any SDLT on the grant of the lease, so probable tax leakage for HMRC there.
Had *very* quick squiz at MapSearch. I don’t think the Coventry St or Whitehall HP shop leases are registered, so they are short term and the terms and identity of the legal tenant is opaque. No idea of the rent, but £50-£80k p/a is possible and landlords usually want to see tenant turnover of 3x annual rent before a letting or else get a hefty rent deposit, so there’s substantial cash needed here. The landlord probably elected to charge VAT on the rent, so the lack of VAT registration is interesting.
A detail that didn't make the story is the turnover of limited companies behind the constantly-trading business on Coventry Street. Since October 2022 there has been W Piccadilly Ltd, W&W Gifts Ltd, Grand Present Ltd, and now Licensed Gift Shop Ltd.
It’s bizarre that anyone can be involved in retail in such a central and expensive location so soon after relocating here? Like I can’t imagine moving to Midtown Manhattan and suddenly running a gift shop on 42nd … (or maybe it’s also happening there and it’s actually a post-Covid retail phenomenon?) It also feels like there’s a stock process here that people know to follow and is possibly well known to a specific diaspora? (Like, call this guy, get your details on CH, get a %age of sales for lending your identity etc and if anyone starts asking questions we can use ChatGPT to write our correspondences in passable legalese) …
“Who are you to check all this?” - new marketing line for you!
Perfect.
If they're not paying taxes, I wonder if they are paying licensing fees to the Harry Potter brand rights owners.
Fortunate for the owners that the actual IP owner is too busy inhaling black mold and publishing rants about trans people than to actually take any action really.
Legitimate HP merch is largely licensed by WarnerBros and if they could track down these patsy directors there'd be a significant IP infringement claim. I've just sent this to a friend in their legal team.
This was the point I did not understand. Why are Warner Bros not all over this? Or do the shops sell some legitimately licensed HP goods?
I believe the stock is legitimate. There have been no complaints from WB, or response to my questions.
This article alone feels worth the annual subscription I just paid.
Great investigation, but "The missing business rates owed to Westminster council could help it fund repairs to the ageing council housing London Centric has reported on..." is not accurate. Council housing, and its repairs are funded by the ring-fenced Housing Revenue Account, not the general council budget. However, the business rates could be used for a myriad of other things, including the support and promotion of small businesses.
Basically because law enforcement moves too slowly to stop them before they phoenix into a new company.
Top work! The contrast between Oxford Street, which I walked down yesterday, and Vienna's (pedestrianised) Rotenturmstraße, which I walked down the previous day, could hardly be greater. In the comparison, central London is a dump.
We have two “cafes” on our street (Seymour Place), one that pretended it would open for a couple of years and is lying dormant with its fixtures and fittings all still inside. There’s an eviction notice on the door that’s been there for a very long time. There’s another just set up a couple months ago on the corner of Crawford St in a shop that’s changed over hands several times. This one has the same style of decor as the non-cafe, menus up to make it look like some kind of juice bar. Never going to open…
Thoroughly enjoyed this! I've often wondered what was going on with all these sweet / HP shops.
Had a good chuckle at "The owl remains in the possession of London Centric" 😁