Assessments to the best of a Commissioners Judgement

Brockley’s Rock, a fish and chip shop, appealed against HMRC’s decision to assess the business for approximately £30,000 as well as imposing a penalty of roughly the same value on the basis that VAT had been underdeclared on VAT returns over a 3 year period in a deliberate and concealed action.

The situation arose as a result of a VAT visit by a HMRC office who, on attending the Appellants premises noted that sales figures and therefore output VAT may have been incorrectly accounted for. Reports were taken from the till as there was doubt over the accuracy of the till figures due to some sales being processed whilst the till was in training mode and some credit cards sales not being listed and therefore, not being accounted for on VAT returns.

Under Section 73 VATA, the taxpayer was assessed by the officer to “the best of their judgement” in the absence of exact figures. In making these judgements, officers must have acted in good faith and based their assessments on findings from the business but were not expected to do the work of the taxpayer to form a conclusion.

There was sufficient evidence that the taxpayer in this instance was supressing their daily takings and so the assessment and penalties were upheld.

This case highlights the necessity for taxpayers to keep detailed records dating back at least six years, as required by UK VAT law and for ensuring that all figures submitted to HMRC via VAT returns are accurate. Failing to keep evidence of how past VAT returns were calculated may lead to what is deemed an unfair assessment of VAT at a later date and may also lead to penalties and therefore, financial losses to the business. If you or your business have been assessed by HMRC or you have received notification of a financial penalty, please call our free VAT helpline for expert advice.

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