What Is Going On With The Sweet Shops On Oxford Street?

Wednesday 24 August 2022

Written by Yedidya Zaiden

What Is Going On With The Sweet Shops On Oxford Street?

What Is Going On With The Sweet Shops On Oxford Street?

In the first half of June 2022 alone, it was reported that more than £100,000 worth of counterfeit and illegal goods including chocolate bars, vaping products, mobile phone covers, and toys with no safety labels were confiscated in raids on American-style themed sweetshops on Oxford Street.

Westminster council, which coordinated the raids, claims that up to £7.9m of business rates have been lost as a result of these shops which avoid the tax by subletting their premises from an intermediary company rather than directly from the freeholder or long leaseholder. The council has struggled to collect rates payments because information relating to the business structures filed at Companies House is insufficient. It has blamed landlords for turning a blind eye to the avoidance arrangements of their tenants, calling for greater transparency in how company ownership is reported at Companies House.

Anyone who has visited Oxford Street in the last few years will have noticed the proliferation of almost identical shops selling similar items, often at inflated prices. Whilst the council’s primary concern appears to be the non-payment of business rates, there are other issues too. The council has written to 28 freeholders, urging them to consider the impact on the area and the wider implications of letting their properties to these types of trades. Council leader Adam Hug explained that these sweet shops are selling poor quality souvenirs and were not only “an eye sore” but also threatened the status and value of the West End shopping and tourist experience.

The Food Standards Agency has found that products sold in such shops may have been produced or repackaged by parties who do not comply with food hygiene laws, and they urged the public not to purchase the products as they may pose a serious health risk.

However, it would seem that whilst these are serious issues, they skirt around the main problem – one which was hinted at in a report to the BBC that mentioned that up to thirty of these shops are under investigation on the suspicion that they were far from regular and legitimate businesses.

Back in mid-2019, Private Eye Magazine ran an article probing the legitimacy of these shops. They reported that the pattern of operation of these entities involves forming a company at Companies House and setting up what appears to be a legitimate business. Sometimes those companies file accounts which report high levels of turnover and healthy profits - and then, after a few years, the companies are dissolved. In other instances, the companies were dissolved before they filed any accounts at Companies House. A search of the register held at Companies House showed that many of the companies were set up by Afghani nationals in their mid-20s who were registered as sole directors and shareholders for a few months each before the companies were dissolved. The magazine alleges that its investigation showed that the businesses were purchasing goods VAT free from connected companies, or abusing the system by reclaiming VAT but dissolving their companies without paying any output VAT or Corporation Tax.

However, anyone who has visited these shops will have noticed that they serve very few customers and would therefore appear not to be commercially viable. So, what is really going on behind the scenes?

Commentators who have examined this more closely claim that almost all of these shops are being used as a front to launder money given to Afghanistan which has been misappropriated by government officials there, or as a way to introduce proceeds from the sale of illegal drugs into the banking system.

This works by opening businesses which appear to be legitimate. Whilst the sweet shops under scrutiny were dissolved without filing accounts, often the businesses will actually pay taxes in order to create an image of compliance and on the basis that the tax charge is a small price to pay to cover up the fraud. Illicit cash is mixed with the other sales and is made to appear as proceeds of genuine sales. Having disguised the illicit funds and created a paper trail showing them to be ‘clean’, they are then filtered back to the criminals.

Is Westminster Council’s tactic of targeting the landlords just an easy way out? Traditional retail has experienced a significant downturn as more and more shoppers make their purchases online. Oxford Street was particularly hard hit during the pandemic with reports that footfall had dropped 71% in recent years. One might therefore sympathise with landlords who are struggling to find tenants and who would be liable for business rates if the premises remained vacant.

A concerned business owner claims to have presented HMRC with hundreds of pages of evidence of alleged fraud but has been turned away. Is HMRC so under-resourced that it can’t pursue the millions of taxes which it is suggested are lost in these schemes? Or are these criminals so good at what they do, that the National Crime Agency feels that it is unlikely to secure a conviction? Westminster Council may be taking the easier route of confiscating goods and closing the shops down, but unless the structures and sources of funds are tackled, these shops, which are already located in places well beyond the West End, will continue to spring up elsewhere – there is just too much at stake for the criminals.

Yedidya is a Partner at Raffingers, a top 100 accountancy practice that specialises in strategic business, tax planning and commercial solutions.

If you would like to discuss any aspect of this article, or for any other business or accounting advice, please email Yedidya Zaiden at

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