HMRC takes a battering in cake shop VAT case

looking forward to the first, have your cake and eat style comment.....oh [***] thats me!

What a mess and a waste of time for everyone...

-not providing an interpreter
-arithmetical errors
-not taking into account corporate sales
-not taking into account the weather
-not taking into account times when the shops were not open.
-basic errors in calculating the amount of VAT due
-the seating capacity was changed

Bravo to those fine jobsworths

The assessments were made for the return periods 09/14 to 03/18 in the amount of
£22,658 and for the return period 03/19 in the amount of £594.02.

Why do these bozo's (i mean at HMRC) ever get to a tribunal?
Internal 'review'... best judgement??
By whom?......Boris?
Small wonder the tax authority (belly laugh here) is so derided.

This reminds me so much of a new central heating and plumbing client whose books had been given to the tax lady by his previous unhelpful accountant a year before.
The tax lady had said he'd fiddled his cash takings as lots more cash had gone through the bank than was in the books.
I asked for the books back and her workings prior to a meeting.
I went through them
...it only took an hour ...to find my client had switched the cash and cheque receipt columns in several months, but the tax lady hadn't on redoing the sales on to an accurate basis xll her " shortfall" disappeared. On being challenged she accused me of rewriting the books. I immediately asked to speak to her District inspector. The case was dropped very quickly. I never got an apology.

I remember a VAT enquiry for a client who I know was correct as we did the bookkeeping and the year end accounts. The inspector claimed that the output VAT had been under-declared by around £50k (it's a while ago so can't remember actual figure). When I checked his calculations, it turns out that he'd mixed up the gross figure per debtors & the net figures per the P&L turnover. Not only that, he was using total debtors (including prepayments, other current assets) instead of just the trade debtors. In the end, he agreed that there was around £5 difference - most likely due to rounding differences!
At least he did apologise.

Makes you wonder if they actually have any accounting / tax training sometimes! May be a job requirement should be several years experience in practice for both inspectors and those who make up the various legislation / hoops we have to jump through?

Glad that HMRC appolagised if only once. But they won't change. Over estimations are cheapest for HMRC whether or not they are legal.

One client referred to us after HMRC used the VAT escalator (I believe illegal in itself) that so fazed the client that he went missing with the latest inflated VAT demand his only identification when he was found weeks later.

Whilst only mentioned obliquely, it demonstrates the futility of asking HMRC to review a decision. The review seems to be made on the decision of the officer and not on the facts on which that officer's decision was made. The process is geared to built in confirmation bias.

https://www.gov.uk/tax-appeals/review-of-a-tax-or-penalty-decision
"You will have your tax decision reviewed by someone at HMRC who was not involved in the original decision. This is known as a ‘statutory review’."

Aside from poor wording "someone", who a peer or the cleaner? No a member of staff in Revenue Solicitor's Office. Then "at HMRC" surely "in HMRC". So the good old boys/girls mark their own homework.

The FTT got stuck in to the process in Alexandra Countryside Investments Ltd [2013] TC 02751 where the review letter read on the matter of the review

"I refer to your later [sic] dated 23th [sic] February 2012 relating to the VAT reclaim for Period 04/11, in which you request an independent review. The Officer who has made the decision concluded after receiving policy guidance and having reviewed the case, I have upheld the Officer’s initial decision."

How could you trust a review where the reviewer could not spell letter or use 23rd choosing 23th? Perhaps it was the cleaner at HMRC Solicitor's Office.

The research shows that the public are inclined not to use the process preferring the tribunal. It really shows that when the chips are down the taxpayer tends to accept the cost of the appeal against the cheapness of a shonky (thank you M Hancock) review.

I've said it before, and I'll say it again;

Oh crumbs!

Things that don't exist:
HMRC’s internal review system
Answering calls in 10 minutes
Flat earth

Reinforces my view that except with larger cases with say Special Compliance , which with the only one I ever did involved HMRC in house accountants being used, HMRC were always generally weak at debits and credits.

I appreciate this case was re vat and I never really defended vat enquiries, but my experience of CT/IT back duties was mainly similar, poor attention to detail, addition errors, not thinking about the business and how in reality it operated (one BD was a chip shop where the officer just did not think that potato costs varied significantly during the year so his mark up using just one purchase invoice to set the cost for his exercise to extrapolate was nonsense)

If HMRC want to really clamp down on smaller trader fraud (because it is out there) their investigation staff ought to be seconded to practice for two years and experience preparing accounts at the coal face, that or employ retired smaller practitioners to check tax payer records.