'Hell's Kitchen' Star Feels Heat of Tax Scrutiny - UPDATE!by
UPDATE – A spokesperson for Gordon Ramsay contacted AccountingWEB directly and asked us to add the following clarification:
"This investigation was triggered by Gordon when he became aware of certain actions and conduct of some employees when the business was run under previous management. Gordon voluntarily approached the HMRC when a note detailing these actions came to light. The employees involved have since been dismissed and Gordon Ramsay Holdings continues to work with Deloitte and HMRC to conclude the matter."
By Teresa Ambord
His familiar scowl appears in millions of homes every week as the star of MasterChef and Hell's Kitchen. But Gordon Ramsay may be scowling over more than culinary imperfections these days. His company Gordon Ramsay Holdings is under growing scrutiny from tax officials in the United Kingdom.
The unwanted attention seems to have started with what has been called an "explosive memo" leaked by Trevor James. James is both a former finance director for Ramsay and before that, a former government investigator who audited Ramsay's operations years ago. James memo points to practices which, if true, implicate Ramsay in wrongdoing, but they also implicate James.
Here's What Happened . . . Allegedly
James was the lead interrogator in an investigation of Gordon Ramsay Holdings in 2005, on behalf of the United Kingdom's HM Revenue & Customs Office. The investigation was looking at claims regarding cash in the company's tip fund – known as a "Tronc fund." The suspicion was that the cash wasn't being handled appropriately and possibly wasn't reported to the tax authorities.
As a result of the examination, Ramsay was cleared of the charges, though he did agree to pay some taxes that were outstanding. The matter was closed.
James Joins Ramsay's Team
At some point after the investigation was completed, Gordon Ramsay Holdings recruited James to work for the company in the finance department. At that time, the chief financial director was Ramsay's father-in-law, Chris Hutcheson. Eventually, Hutcheson and Ramsay became embroiled in a bitter dispute over cash and Hutcheson was fired, according to the UK Daily Mail. James then replaced him as the head of financial affairs.
In 2010, Ramsay's company was investigated again, and James now admits in his memo he misled investigators in order to reduce the company's tax and insurance. The memo gives details of how he hid the truth from authorities to help the restaurant empire slash its National Insurance bill and its income tax liability – which he said would have been seven figures. Again, the misuse of tip funds was mentioned.
On May 7, 2013, James was fired under "mysterious circumstances", said the New York Daily News. Another media source (Nagalandpost.com) reported that James resigned on his own, and that he actually stopped providing services for the company several months before that, in September 2012. Nagaland also reported that at the time of his leaving, James signed a "watertight gagging clause", intended to prevent him from going public with any information about Gordon Ramsay Holdings.
Clear as Mud
There are conflicting reports about whether the Master Chef knew what was in the memo and, if he knew, what action he took. Ramsay himself denies wrongdoing and says when the memo came to his attention, he promptly took the matter to UK tax officials. Now in an effort to clear his name, he has employed the tax firm of Deloitte at "enormous expense."
Five senior partners at Deloitte are busy scouring 30,000 e-mails looking for information to help Ramsay's case, said the New York Daily News.
Ramsay's company did acknowledge that some money from the tip fund was distributed "incorrectly" as part of employee compensation, according to the Daily Mail. The memo written by James said the fund included a great deal of money that was never reported to the tax authorities, about £375,000 (roughly $580,200 in US currency). Ramsay's spokesman said the issue has been resolved and asserted none of the money in the Tronc fund was used by Ramsay himself.
The Daily Mail also reported Gordon Ramsay Holdings has been on shaky financial ground for some time, with debts of £36.6 million (nearly $56.7 million) and cash assets of just £45,500 (about $70,354).
So what does Ramsay have to say about all of this? He minces no words. "Complete and utter rubbish."
At this time, the charges are civil. But if serious tax evasion is uncovered, tax officials can file criminal charges which could result in jail time. If the worst happens and Ramsay does jail time, heaven help the prison cooks. If you've ever seen him in action, you can imagine the echo behind prison walls . . . familiar words from a constantly annoyed, appalled, outraged Master Chef.
"This is raw!"