Harry Potter and the unpaid tax bill
A London Centric investigation reveals one of the capital's most garish gift shops owes hundreds of thousands of pounds to the local council — and uncovers its mysterious owners.
One of my favourite things about running London Centric is the emails and WhatsApps from readers. You tell me what you’ve been missing from coverage about London — and pose questions you want answering about life in the capital.
A month ago subscriber Stefano Scallione got in touch to ask why there had been a recent “influx” of Harry Potter-themed gift shops on the streets of central London. “Thought it might be an interesting subject to explore,” he said.
Well, Stefano’s email started an investigation that took us deep into the murky financial world of some of the West End’s most prominent retail sites. Over the last few weeks I’ve been working with reporter Cormac Kehoe, who eventually tracked down the owner of some of these shops – and got a surprising response to our questions.
Today’s London Centric story, available below for paying subscribers (free trials are available, or sign-up now for 25% off) is an extraordinary tale of strange businesses practices happening in plain sight on some of the capital's busiest streets – and the impression of London that tourists are presented with. It also raises some serious questions for the authorities about activities that are happening on their watch.
London’s Harry Potter shops, the mysterious owner, and the £400,000 tax bill.
Safoora Shafeeq is, on paper, one of London’s most successful start-up retail entrepreneurs. Yet you won’t find her at glitzy black-tie balls with the rest of the capital’s business elite this festive season.
This summer the 31-year-old Indian national became the legal owner of four of the most prominent Harry Potter-themed gift shops that have sprung up over the last few years in high-profile central London locations.
Her outlets, with names such as “Wizards and Witches” and “Magical Platform”, occupy large retail units in some of the most famous tourist spots in the country, including Piccadilly Circus, Trafalgar Square and Oxford Street.
The stores, which are expensively kitted out with replica Ford Anglia cars and other props from the film franchise, contain hundreds of thousands of pounds’ worth of Hogwarts-themed clothing, wands, and other Harry Potter goods. Even in the midst of a sluggish economy, the shops are full of customers and doing a busy trade, catering to the enormous tourist market still hooked on the works of JK Rowling.
London Centric set out to profile the woman who had suddenly taken control of a fast-growing retail chain, in what appeared to be a distinctly British business story. Instead, we found a tale that raised questions about non-payment of taxes, enforcement of corporate law, and the declining state of London’s supposedly high-end shopping streets.
Getting in touch with Safoora Shafeeq was not easy. When workers in her shops were asked for their owner’s contact details, London Centric was given similar responses: “They’re not in” or “they don’t come in here”.
Eventually London Centric tracked Safoora Shafeeq down to Botley, a modest suburb of Oxford. She lives there in a rented 1930s semi-detached house near to the city’s ring road with her husband, Shafeeq Pallivalappil, and their two children.
Originally from the southern Indian state of Kerala, the couple arrived in Oxford in 2020. According to Shafeeq Pallivalappil’s Facebook page, they found life hard at first and he had to work multiple jobs to meet the high cost of living in the UK. He wrote about putting in extra hours “on public holidays and weekends, without any extra payment” while his wife, according to neighbours, cared for their children and does not appear to have a track record running businesses.
Yet this summer Safoora Shafeeq filed documents at Companies House to become the legal owner and operator of four Harry Potter-themed shops in central London, collectively employing dozens of people and selling highly-priced merchandise to tens of thousands of tourists in areas with some of the most expensive real estate in Europe.
One of these outlets owes Westminster council as much as £400,000 in unpaid business rates, according to individuals with knowledge of the shop’s operations, while three of her four shops do not currently charge the 20% VAT sales tax.
When London Centric knocked on Safoora Shafeeq’s door to ask how she took ownership of the chain of Harry Potter-themed shops and whether she is paying the required taxes, she initially didn’t answer. Ten minutes later she emerged and started jogging down the street, while calling her husband and putting him on speakerphone.
At first she denied owning the Harry Potter shops, despite signing legal documents stating she is the sole shareholder and director of the businesses, roles which come with a large number of legal obligations. Instead, she told London Centric she is just “running” them.
Asked who the real owner was, she deferred to her husband, who failed to answer. He also said that his wife did not speak English to a sufficient standard to answer our questions. His exasperation was clear, and he later had a question for London Centric in return: “Who are you to check all this?”
(Two days after the release of this article, Safoora Shafeeq responded to a series of questions sent prior to its publication. She said previous legal operators of her Piccadilly Circus Harry Potter shop, who include a limited company owned by her husband, are responsible for the unpaid business rates on the property and said she is “awaiting the updated bill to make payments accordingly”. She also said it was misrepresentation to suggest she ever denied owning the Harry Potter shops and said her lack of English is irrelevant as “I use translators and my husband assists in drafting responses when required”. She said the reason staff in her Harry Potter shops do not know her name is because she has appointed “regional managers” to deal with day-to-day operations of the business and “I do not directly interact with staff regularly, which may explain why they are not familiar with me personally”. She also told London Centric this article contains “baseless accusations” that are defamatory.)
“Patsy directors”
The proliferation of Harry Potter shops in central London is part of the wider story of the collapse of the British retail industry over the last two decades, the poor state of the capital’s key shopping streets, and the strange business practices of the London gift shop trade.
The failure of a number of well-known retail brands over the last decade has left behind multiple empty units on high streets and landlords desperate for available tenants to fill them. At the same time, the continued lack of resolution over a long-running battle between mayor Sadiq Khan and Westminster council regarding the pedestrianisation of Oxford Street has helped to leave the country’s most famous shopping street and its surrounding roads in a shabby state, with some building owners reluctant to invest amid an uncertain future.
Into this gap stepped a series of temporary shops selling perfume, luggage, and souvenirs. Others sold American candy. The ‘candy shops’ became notorious among Londoners for their illegal practices and were openly described as “far from legitimate businesses” by Westminster council. Some of them were avoiding millions of pounds in business rates (the company equivalent of council tax, paid by tenants to their local authority), not paying corporation tax, or simply selling counterfeit Willy Wonka bars at over-inflated prices. There were even claims that the candy shops were “a hub for global money laundering”.
One person involved in dealing with the candy shops described to London Centric the exhausting battle with “patsy directors”. They were put in place by the real owners, who would find someone to sign documents and take legal ownership of the business for a few months at a time before handing control to a fresh person.
Years of enforcement by Westminster council has started to drive these candy shops out of business. In their place – literally, in the case of some retail units – have come the Harry Potter shops. Some of the individuals who have operated Harry Potter shops have a past record of running candy shops, and in one instance they even retained the same phone number for the new business.
Many of the new Harry Potter shops also have similar corporate ownership structures to the candy shops, raising serious questions about how they are operated and the transparency of their tax affairs.
Wizards and Witches, a large store between Piccadilly Circus and the Book of Mormon’s home at Prince of Wales Theatre, is a typical example. Since it began trading in October 2022 the store has been operated by four different companies, which in turn have been owned by five different people, all in their 30s and with Indian nationality. None of the companies that have operated the shop during its two years of trading have filed accounts, while three out of the four have changed their legal addresses and their directors.
This shop’s latest change of legal ownership came this summer, when it was taken over by Licensed Gift Shop Ltd, a newly-formed company owned and controlled by Safoora Shafeeq — the woman in Oxford who insisted she is not the real owner.
“We will not hesitate to initiate a lawsuit for defamation”
Exactly what is going on the shop floor is unclear. The prices are high – there’s faux-leather Hedwig purses going for £50, single chocolate frogs for £7.99, and Slytherin pens for a tenner — but a lot of people are buying the goods.
What’s more certain, after London Centric bought souvenirs from all of the outlets, is that three of the four Harry Potter shops owned by Safoora aren’t charging customers the 20% VAT sales tax levied on most purchases in the UK. One of those shops is Magical Platform on Whitehall, just a few hundred metres from the desks of both chancellor of the exchequer Rachel Reeves and HM Revenue and Customs boss Jim Harra.
One explanation for this could be that each of the Harry Potter shops has yet to earn £90,000 in revenue in the last year, meaning they do not meet the threshold to charge VAT. Yet while this might seem a lot of money, it is a tiny sum for businesses based in expensive London locations and would barely cover the rent and staff costs.
After London Centric left a series of questions about the shops’ tax affairs with staff operating the tills, we swiftly received a message from an email account in the name of Safoora Shafeeq. It said: “As a new business, we are fully aware of our tax obligations and are in the process of registering for VAT within the required timeline. Filing and compliance are priorities for us, and we are adhering strictly to all legal requirements.”
Shafeeq, who was previously described by her husband as struggling with English, wrote: “While we respect your right to investigate and publish stories, please be advised that any false, misleading, or defamatory statements published about our company or its operations will be met with immediate and decisive legal action. We will not hesitate to initiate a lawsuit for defamation and seek substantial damages to protect the reputation and integrity of our business.”
Avoiding VAT was a tactic heavily relied upon by a previous generation of gift shops that arrived in the West End two decades ago, starting with a unit opened in a ground floor unit of the Trocadero centre in 2006 selling cheap Chinese-made merchandise.
This network, led by a group of Afghan businessmen, ran a series of companies that were regularly dissolved before filing any accounts. Smaller independent businesses in the area who paid their taxes in full were unable to compete and these gift shops multiplied.
The press, along with several MPs, called for the HMRC to intervene. As for the Trocadero, where the first of those gift shops was situated? A unit in the same building is now occupied by Wizards and Witches, owned on paper by Safoora Shafeeq.
“Experience in retail is not necessary”
One lingering question is whether Safoora Shafeeq is the ultimate financial beneficiary of her chain of Harry Potter shops. A sign in her Wizards and Witches store suggests the existence of a curious industry offering potential franchisees a chance to open a Harry Potter-themed souvenir shop anywhere in the UK.
“Have you always dreamed of owning your own Wizards and Wonders emporium? We want to hear from you,” says the advert. “When you join our team, you become part of a national strategy that leverages our industry experience to give you all the tools you need to run a successful theme shop. We’ll support you in creating and running your shop, and help you to create your own empire while helping us grow ours.”
The site makes clear that “experience in retail is not necessary”.
It is unclear who is ultimately behind this Harry Potter shop franchise offer, which promises “all the tools” to set up a shop, and support to run it.
Safoora Shafeeq, who originally denied owning the shops, later sent an email to London Centric insisting that she had misspoken. In reality, she insisted, all the stores are “owned and managed by myself”, with assistance from her husband Shafeeq Pallivalappil.
“Together, we are directly responsible for the day-to-day operations of the business,” the email insisted. That same evening her legal registered address was changed from Oxford to a shared office space in Liverpool.
“A glut of tourist tat”
You might think that tourists being ripped off for overpriced goods is just a part of London’s long traditions, and in an area of the city that many of its actual residents try to avoid. But over the last few years, opaque networks of shops have strangled the legitimate sweet and gift shop trades in the capital’s tourist heartland, and muscled their way into dozens of storefronts in the West End. The missing business rates owed to Westminster council could help it fund repairs to the ageing council housing London Centric has reported on, while independent small businesses that pay their taxes have been driven out.
Harry Potter shops appear to be the latest chapter in this long-running saga, in which the West End presents itself to visitors from across the world as a series overpriced tat shops and bland corporate chains.
Councillor Adam Hug, leader of Westminster city council, asked London Centric to send our findings about the shops’ VAT status to HM Revenue and Customs for further investigation. He said his local authority will continue to pursue unpaid business rates in court: “The council worked hard to turn the tide against candy stores which have in many cases been selling unsafe and illegal goods. We want Oxford Street and the West End to be a high-quality offering of attractive brand names and experiences, not a glut of tourist tat.”
He added: “If Harry Potter stores are proven to have been breaking the law, they will experience the same treatment that unscrupulous traders get anywhere in Westminster – the prospect of legal action by HMRC.”
Safoora Shafeeq’s husband originally made it clear that his wife, the legal operator of large West End retail units that are not currently charging VAT, could not answer basic questions about tax affairs or business practices.
In an initial response to London Centric’s questions, since recanted, he repeated words that may be of interest to HMRC and any other organisations looking into the ownership of the capital’s Harry Potter shops: “We don’t know anything.”
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Great piece of reporting!!
What I don't understand and would love more context on is, how do these businesses get away with not paying tax?