Aleksander Vinni v The Commissioners for HMRC

27 October 2023

[2023] UKFTT 911 (TC)

First-tier Tribunal

HMRC wrongly estimated Mr. Vinni's VAT. The judge found some mistakes but not deliberate dishonesty. They corrected the math and threw out a later smaller part of the tax bill. They also said they couldn't deal with a fine that was already cancelled.

Key Facts

•Mr. Aleksander Vinni, trading as Honey Cake Patisserie and Sandwich Bar, appealed VAT assessments issued by HMRC under section 73 of the Value Added Tax Act 1994 (VATA).
•The assessments covered periods 09/14 to 03/18 (£22,658) and 03/19 (£594.02), with related penalties (£3,398.70 and £91.06 respectively).
•HMRC's assessments were based on an alleged underdeclaration of standard-rated sales, determined through test purchases and an invigilation.
•Mr. Vinni argued that the assessments weren't made 'to the best of HMRC's judgment' due to errors in HMRC's calculations and the unrepresentativeness of the chosen period for the assessment.
•The case involved discrepancies in HMRC's evidence, including errors in notes and calculations, and questions about the methodology used to determine the proportion of standard-rated sales.

Legal Principles

Assessments under section 73 VATA must be made 'to the best of HMRC's judgment', requiring an honest and bona fide value judgment based on available material. HMRC is not required to conduct exhaustive investigations.

Van Boeckel v Customs & Excise Commissioners [1981] STC 290

Two questions arise in section 73 VATA assessments: (1) Was the assessment made under the power conferred by section 73, including whether it was to the best of HMRC's judgment? (2) Is the amount of the assessment correct?

Pegasus Birds Ltd

Errors in an assessment don't automatically invalidate it; the question is whether the mistakes show a lack of honest and genuine attempt at reasoned assessment.

Rahman (t/a Khayam Restaurant) v Customs & Excise Commissioners (No.2) [2002] EWCA Civ 1881

The tribunal can set aside an assessment or adjust the amount to a fair figure.

Pegasus Birds Ltd

Appeals against cancelled penalties are futile as the tribunal cannot reinstate or modify a non-existent penalty.

Schedule 24 FA 2007, Rule 8(2)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009

Outcomes

The appeal for the 09/14 to 03/18 period was partially allowed. The assessment was to be recomputed using a corrected percentage of standard-rated sales (26.72%) which accounts for corporate sales.

HMRC's calculations contained arithmetical errors and the self-invigilation period used to determine the proportion of standard-rated sales was not entirely representative, but the errors did not demonstrate a lack of honest attempt at assessment.

The assessment for the 03/19 period and related penalty were set aside.

HMRC's refusal to accept Mr. Vinni's error correction was arbitrary and not in accordance with 'best judgment'. Mr. Vinni had made the adjustment under perceived pressure and the error correction was supported by evidence.

The appeal against the penalty for the 09/14 to 03/18 period was struck out.

The penalty had already been cancelled, rendering the appeal futile and lacking in jurisdiction for the tribunal to act upon.

Aleksander Vinni v The Commissioners for HMRC

Key Facts

Legal Principles

Outcomes

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