Jagtar Singh Rai & Anor (t/a Bursha Foods) v The Commissioners for HMRC
[2024] UKFTT 511 (TC)
Sprowston Food and Wine Limited v The Commissioners for HMRC
15 August 2024
[2024] UKFTT 747 (TC)
First-tier Tribunal
A small business owner appealed tax penalties. The tax authority showed the business owner hadn't fully declared all sales and used the money for personal expenses. The judge agreed with the tax authority, finding enough evidence to support the penalties, and dismissed the appeal.
Key Facts
- •Sprowston Food and Wine Limited appealed HMRC's revised VAT assessments (£23,032) and penalties (£14,514.56) for deliberate inaccuracy.
- •HMRC's assessments were based on corporation tax calculations indicating under-declared VAT due to unaccounted sales used for the director's personal expenses.
- •The appellant argued that time limits were breached and that HMRC's best judgment was flawed.
- •HMRC used the director's personal expenditure as evidence of under-declared sales.
- •An independent review reduced the VAT assessments and penalties but upheld the 'deliberate' nature of the penalties.
- •The appellant argued that the corporation tax appeal settlement should have automatically adjusted the VAT liability.
Legal Principles
VAT assessments under section 73 VATA must be made within time limits specified in sections 73(6) and 77, with extensions for deliberate inaccuracies.
Value Added Tax Act 1994 (VATA), sections 73(1), 73(6), and 77(4)(4A)
HMRC's best judgment must be exercised honestly and reasonably, based on available material; exhaustive investigations are not required.
Van Boeckel v Commissioners of Customs and Excise [1981] STC 290
To succeed in an appeal against a best judgment assessment, the taxpayer must prove the assessment is more likely than not excessive.
Tynewydd Labour Working Men's Club and Institute Ltd v Customs and Excise Commissioners [1979] STC 570
Penalties for inaccuracies are imposed if the inaccuracy was careless or deliberate; special circumstances may justify a reduction.
Finance Act 2007 (FA), Schedule 24, paragraphs 1, 3, and 11
The definition of 'special circumstances' for penalty reduction is broad and allows for a wide discretion.
Barry Edwards [2019] UKUT 131 (TCC)
Outcomes
Appeal dismissed.
HMRC's assessments were made within the time limits; HMRC's best judgment was reasonable and not arbitrary, based on available evidence; the appellant failed to demonstrate the assessments were excessive; the penalties for deliberate inaccuracy were justified; no special circumstances warranted a penalty reduction.