A top Swansea restaurant has been left saddled with £65,000 of debt and unable to furlough its 24-strong team of staff due to a tax error, its owners claim.
Owners of the Mermaid Cafe Bar & Restaurant in Mumbles have been left in a “desperate” situation after being forced to close its doors due to the Covid-19 crisis.
They said they are in more debt now than they were when they first started the business, which they have built up into a successful venture.
When the firm switched from being a limited company to a partnership they were issued a VAT number but were not a new PAYE number, which they say has blocked them from applying for furlough for their staff.
An HMRC spokeswoman said the coronavirus job retention scheme had helped to protect thousands of jobs nationwide and added there was a complaints process for firms.
Simon Paine, who jointly owns the firm with Stewart Montgomery, said they had not been able to earn a penny since February.
He said: “It’s a desperate situation. There’s no flexibility in the system that HMRC and the issues stem from a fault with HMRC.
“We changed the company from a limited company to a partnership. We had a VAT number but didn’t have a PAYE activation code to claim furlough pay.
“RSIs (Retail Sales Index) had to be confirmed by March 19 but as far as they are concerned we did not exist.
“We applied three times to be a partnership from January but we weren’t entitled to furlough pay.
“We were thought we could have it and were told that they would override the system.
“Then we were told you have to be on the system with a joint account.
“We were told ‘no you are not entitled to it because your company has not existed since March 19′ but it has been there since 2013.
“We have been paying the National Insurance contributions of our staff.”
He added: “They took a VAT payment of £52,000 from us and £8,000 two weeks ago off us even though we have a company that does not exist.
“A lot of our staff have not been able to claim Universal Credit. We have not been earning any money since February.”
The firm was given a £25,000 Government to Business grant which they used to pay their team of staff for March and April’s wages as they had believed they would be able to claim furlough.
Mr Paine said: “The business was substantial and we were in profit – we are now in debt of £65,000 and that is rising.
“We have got incurred costs that we cannot get rid of. My main concern is to look after our staff.
“Some have had to leave and go elsewhere as they haven’t been able to earn a single penny since February.
“Between myself and Stewart we have four kids to pay for and we haven’t had any money.”
He added: “The worst thing is it is a successful business and we have had to put our heart and soul into it. It’s been stripped away overnight.
“The government said it would support every business. HMRC has admitted it is through a fault of their own they did not give an activation code.
“We have more debt than when we went into it. We haven’t been able to pay rent or utilities since March because there is no cash flow.
“We have had to borrow another £40,000 just so that we could pay our suppliers during this time because our business was forced to close overnight.
“If we had the VAT back we would be able to pay our staff for two months.
“All of our employees currently on our payroll will all lose their jobs if we are unable to make this claim.”
Gower MP Tonia Antoniazzi criticised HMRC over the case. She said: “A successful business has been blown to pieces because of the incompetence of HMRC.
“It’s absolutely disgusting – they were solvent and in a strong position before. It’s abysmal and shows their incompetency – on every level it’s wrong.”
An HMRC spokeswoman said: “The coronavirus job retention scheme has been delivered at unprecedented pace and is protecting thousands of jobs up and down the country.
“We do not comment on identifiable businesses but if an employer believes there have been mistakes or unreasonable delays with their application caused by HMRC they should follow our complaints process which can be found on the gov.uk website.”