Owner of famous hotel told the taxman he had no staff

A the owner of a famous seaside hotel accused of pocketing his staff’s tax and national insurance told a taxman that his company did not have any employees, a court heard.

HMRC officer Stuart Small said Michael Stainer, 75, informed him there was no point in him inspecting The Grand hotel in Folkestone, Kent, because no-one worked there.

Stainer and his wife, Doris Stainer, 65, deny cheating the public revenue and defrauding their employees out of £473,097.07.

Giving evidence at Southwark Crown Court, Small said: ‘The initial basis of the inquiry was after a letter about national insurance contributions.

‘A member of staff was trying to get a pension and saw that they were unable because of a gap in their contributions. We saw that The Grand was their employer.

‘In the instance of The Grand, there was a number of limited companies registered at the premises and these had all registered for a PAYE scheme and had all been cancelled without any payments being made to HMRC.

‘The companies had submitted statements and in there it stated wages to staff and the approximate number of employees.

‘Sometimes it would say five and other times it would say eight.’

Anthony Hucklesby, prosecuting, asked: ‘None of these companies had submitted returns or made payments in relation to PAYE schemes?’

‘No they had not,’ replied Mr Small.

‘They were cancelled following calls from out debt management team and our records say that Mr Stainer had told individuals from our team that the company had no employees and wished to cancel the schemes.’

Mr Small also said that he spoke to Stainer himself in March 2009 trying to arrange a visit to the hotel.

‘He had received a letter stating the date I wished to visit The Grand. He said he couldn’t make that date, I asked if we could rearrange.

‘He said he did not have any employees so there was no point in visiting.’

When Mr Small was able to visit, he said that Stainer again told him in person that there was no employees.

He then interviewed the payroll and management staff before asking to see the payroll records.

‘I asked to see old records. They told me they were kept in a cupboard that was locked but when it was opened it was empty.

‘I did eventually get hold of those records.’

‘What did you find?’ Mr Hucklesby asked.

‘That there had been approximately 100 employees on the payroll for the last three to four years. Various levels of income had been paid over and a substantial number of PAYE tax had been withheld from staff.

‘It took me about a month to go through the records and I sent it to a special team to consider whether a significant evasion or fraud had taken place.’

Mr Small also told the court that he arranged another meeting with Mr Stainer after discovering that the employees were spread over several companies and he wanted to find out who was employing who.

During this time Mr Small said Stainer was still denying that he had any employees.

Mr Hucklesby said that Stainer had claimed to have been given some breathing space to pay back the debt he owed in tax as he said his business could not afford it.

The hotel owner also received penalty notices on 14 June 2011 fining him £1,200 because he had failed to submit end of year returns for his employees.

‘He says he was grateful for the breathing space,’ said Mr Hucklesby. ‘Had you given him breathing space?’

‘No, the indications in my visit was that they needed to make monthly payments and that matter was referred to our debt management team,’ replied Mr Small.

‘Did you say or do anything to imply that HMRC was giving breathing space to Mr Stainer?’

‘No.’

Mr Hucklesby read to the jury statements of current and former employees of The Grand.

Gavin Purse, who made his statement on 10 February 2017, said: ‘I was employed as a commis chef between 2010 and 2012. I was on a zero-hours contract and was paid the national minimum wage.

‘I was paid in cash every Friday. My wage slips detailed deductions of income tax and national insurance.

‘It was my understanding that these were paid over to the authorities. I have never heard of The Grand being an employee-owned company. I have never been part of any employee share scheme or received any bonuses.’

Another employee, Robin Todd, said on 11 February 2016: ‘I am currently employed at The Grand and have been for approximately five years. I am now a receptionist.

‘I get £6.70 per hour and work 26 hours per week. I am paid weekly in cash on a Friday.

‘I am aware of the dispute between HMRC and The Grand although not in great detail. I received a letter from HMRC saying I owe about £3,500 in tax. I showed this to the hotel manager Robert Richardson.’

Mr Hucklesby also took the jury through an interview between HMRC officers and Stainer after his arrest on 23 July 2015.

In it, Stainer explained that The Grand is more of an apartment complex than a hotel and that his annual income of £50,000 comes from garages that he rents out to the tenants.

He also said that while Grand Folkestone Ltd employs his staff, it is Kentish Estates Ltd which collects the rent money to distribute out towards wages and the upkeep of the building complex.

‘And what about the money left over?’ Steven Betteridge, the HMRC officer, asked.

‘There is nothing left over, that is why Inland Revenue has not been paid,’ replied Stainer.

‘The problem is that there has been insufficient money to pay the bills and all the litigation has contributed to that.’

‘Are all the staff employed by one entity?’

‘That is where the problem is. It used to be that they all employed their own and the Inland Revenue came and said everyone has to be employed by one company.’

Mr and Mrs Stainers, of The Grand, The Leas, Folkestone, Kent, deny two counts of cheating the public revenue and one count of fraud by false representation.

The trial continues.