HMRC must do batter in fish shop VAT tribunal case
A seven-year VAT assessment for understated takings in a fish and chip shop was reduced to two years because HMRC was too slow issuing it to the taxpayer. Neil Warren explains the time limits in the legislation as far as VAT assessments are concerned.
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This case illustrates perfectly the utter complexity of what should have been a simple tax with simple rules and why I leave anything other than the simplest VAT issues to the experts like Neil!
Hopefully the information was passed on to the other sections of HMRC and a massive income or CT bill follows too.
The quantum of the PLR if the tax is not assessable was considered by the UT in Robertson. This was a HICBC case. The FTT (our Richard Thomas and Susan Stott) considered, as this was a FTN case, that section 29 TMA 1970 didn't allow HMRC to assess HICBC and reasoned if the tax wasn't legally due, in can't form (part of) the PLR. The UT disagreed - if for technical reasons the tax can't be assessed it doesn't mean that the taxpayer's failure or error or deliberate conduct hasn't led to a loss of tax ie the PLR is unaffected by any defect in s 29 or in HMRC's conduct.
If the tribunal in Albany has been aware of Robertson it would have been bound by precedent to come the conclusion it did come to.
The owner was operating as a sole trader. Given the time and plaice of the events in this story, it cod be just a red herring. Batter off to just to fry and ignore it.
Er "systematically excluding lunchtime sales". Seems very fishy (I won't do the chips one). The point I want to make is, what happened to fraud, criminal proceedings etc.?
It may well have been considered and rejected, possibly there were 'bigger fish' to fry.
This can often be the reason why assessments are issued late as the assessing officer has to put the matter on hold whilst that consideration takes place.
Other reasons can be where the business records are so bad, they often require substantial reconstruction, although the assessing officer should be issuing a best judgement assessment at that point in line with Van Boeckel.
Effectively HMRC made a cod of things and got themselves between a rock and a hard place, as a result they lost HMG a fair few squid.
It is likely to have been considered for criminal proceedings, but there are numerous reasons why it would have not been pursued. I do wonder what else happened in this case tho - numerous hoops will have been jumped through before it got to the tribunal stage - it seems very odd that no one will have picked up the very basic issue of the one year rule. I suspect that HMRC were of the opinion that they did not have the required information to assess until much later. Interesting about the penalty though
It's almost got to the point with HMRC enquiries that, apart from the obvious penalty mitigation factors, clients should be advised of the Revenue's administrative incompetence which might lead to similar good fortune.
Meanwhile the HMRC head honcno still hasn't had his chips.