Independent VAT Consultant
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Fish and chip shop
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HMRC must do batter in fish shop VAT tribunal case

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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. 

25th May 2021
Independent VAT Consultant
Columnist
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There is no doubt that Albany Fish Bar Ltd (TC8083) deserved both a big VAT assessment and a large penalty for ‘deliberate and concealed’ behaviour because the company was guilty of “systematically excluding lunchtime sales from its VAT returns.”

The assessment for £109,670 covered periods October 2010 to April 2017, and was issued by the officer on 9 August 2017. A separate penalty of £87,736 was charged to the director and shareholder Mr Akhtar through a personal liability notice. Make a note of these dates because they are important.

Time limits - example

Imagine that your business had an HMRC compliance visit on 15 March 2020. You give the officer two purchase invoices, which confirmed that you had overclaimed input tax by £1,000 on your December 2019 return and £750 on your December 2018 return. The officer eventually issued an assessment for £1,750 to correct the errors on 18 May 2021. Is he correct?

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Replies (13)

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By Ian McTernan CTA
25th May 2021 12:27

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.

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Replying to Ian McTernan CTA:
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By Justin Bryant
25th May 2021 13:23

I would call it small-fry rather than massive.

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By More unearned luck
25th May 2021 17:11

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.

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Replying to More unearned luck:
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By Charityguy
26th May 2021 09:56

Huh...

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By TBro4iuABEW6Qmh74nRteQz3
26th May 2021 09:50

Came for the pun. Stayed for the comments.

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Replying to TBro4iuABEW6Qmh74nRteQz3:
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By Charityguy
26th May 2021 09:57

I didn't find the pun "that" exciting lol

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Replying to Charityguy:
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By TBro4iuABEW6Qmh74nRteQz3
26th May 2021 18:38

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.

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By johnjenkins
26th May 2021 10:52

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.?

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Replying to johnjenkins:
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By HMRC Escapee
26th May 2021 12:38

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.

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Replying to HMRC Escapee:
Maytuna
By DJKL
26th May 2021 14:50

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.

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Replying to DJKL:
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By johnjenkins
27th May 2021 11:51

So you reckon he was a bit of a shark having a whale of a time.

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Replying to johnjenkins:
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By Bayhorse
27th May 2021 12:33

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

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By Mr J Andrews
26th May 2021 15:28

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.

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