Enterprise chief reveals licensee tax scandal to MPs

Enterprise Inns chief executive Ted Tuppen has told MPs that some of his company's licensees buying outside the beer tie are also committing tax fraud with the help of wholesalers.

During a lively session of the Business and Enterprise committee inquiry into pubco power, Tuppen said: "One of the reasons they will buy outside the tie will just be to buy more cheaply, but we have strong evidence that some of that buying outside the tie is done to make more money by buying it for cash, by not putting it through the books and therefore avoiding VAT, income tax and corporation tax."

In the past year, Tuppen said, Enterprise had been in contact with four wholesalers who had been delivering to its pubs, but did not have information on how many cases had been reported to the police.

Simon Townsend, Enterprise's chief operating officer, said the company had "photographic evidence" where wholesalers had given a "significant" number of their licensees equipment to help them avoid beer monitoring systems.

He made also made reference to a case in Sheffield where six pubs had made £72,000 of "illegal purchases" which they are pursuing.

Tuppen refused to be drawn on how widespread this was, but Townsend told the committee it was "not large-scale".

"These are very serious issues and not a Robin Hood crime," said Tuppen.

Enterprise had £3.6bn of debt, which represented around a 60 per cent mortgage on its properties, he also revealed. "The numbers are large, but we have a lot of pubs," he said.

He earlier said 184 licensees had been evicted in the last 12 months, primarily for breaching their agreement. Around 800 of its pubs were currently in "intensive care" and receiving help.

Tuppen earlier said that the average profit for its licensees was "in the range of £42,000".

Meanwhile giving evidence at the same time, Giles Thorley, chief executive of Punch Taverns, argued that the advantages to signing up to the pubco model were "extremely extensive" and that Punch had invested £300m in its estate since the last inquiry four years ago.

However he admitted the company had £4.5bn worth of debt, which was less than a 70 per cent mortgage. But he said: "The level of debt is the same as it was over the last five years."

Thorley said that 575 keys had been handed back, but of these 484 had been re-let. Tuppen said 170 of his licensees had returned keys.