Mr Singh & Mrs Kaur t/a "Superdish" v Her Majesty's Revenue & Customs, V 20983

20983

Value Added Tax - Alleged under-declaration of turnover of fish and chip “take-away” - Application of the ascertained turn-over of one short period to calculate the assumed true turn-over over several years - Burden of proof - Appeal dismissed

MR SINGH & MRS KAUR T/A “SUPERDISH” Appellants

• and –

Tribunal: HOWARD M NOWLAN (Chairman)

KEN S GODDARD, MBE

Sitting in public in London on 11 February 2009

Kevin Andrew of VAT Consultants Ltd for the Appellants

Mrs Pauline Crinnion of the Solicitor’s Office of HMRC for the Respondents

© CROWN COPYRIGHT 2009

1. This was the second of two somewhat related appeals in both of which the Respondents were contending that the turnover of the Appellants’ fish and chip take-away shop and restaurant in Broadstairs Kent had been understated. The evidence relied on to substantiate very substantial contended increases in turnover was not particularly extensive and we felt some sympathy for Mrs. Kuar, one of the two Appellants who alone gave evidence on their behalf. However we felt it impossible to accept, (on the first point that we must address) that HMRC’s officer had not exercised her “best judgment” in making the assessments that she had made. On the second issue of whether the Appellant satisfied the burden of proof to persuade us that we should nevertheless make some adjustment or reduction in the amount of the assessments, there was virtually no reliable evidence on which we could make such adjustments. Accordingly, and with some misgivings because we suspected that the genuine turnover of the business had been declining over the relevant months covered by the assessments, we felt compelled to dismiss the Appeal.

2. Evidence was given by Mrs. Kuar, who was one of the two partners in the business, and by Mrs. Julie Barnes, a senior officer with HMRC.

3. HMRC’s investigations in relation to the turnover of the Appellants’ fish and chip “take-away”, “Superdish”, began with an unannounced visit made by Mrs. Barnes and another officer on 4 October 2001. This visit led to the first assessments in which the turnover in previous periods, back to the date when the Appellants purchased the business, was all increased because it was alleged that the declared turnover had been substantially under-stated. Although the first assessments were the subject of a different appeal, all the facts in relation to the first visit, and the subsequent discoveries, and adjustments made, are relevant in relation to this, the second, appeal.

4. When the till-roll was examined on 4 October by the two officers, they removed it because it appeared that the recorded takings on the relevant till roll were in the region of double the takings that were regularly being returned in the Appellants’ VAT returns. When the officers returned to the premises in the afternoon they had a discussion with the Appellants who admitted that they had been suppressing their turnover for VAT purposes. They said that when they had purchased the shop, the vendor had said that the weekly turnover was in the region of £2000 but that he had been declaring between £800 and £900 a week. The Appellants had accordingly decided to do likewise, but they claimed that turnover had only risen from a weekly figure of about £1300 to between £1800 and £2000 in July 2001. Examination of the till-roll indicated, however, that the turnover for the previous week had been £2310.78, or £2229.92 if Sunday takings were excluded.

4. It emerged in due course that the Appellants could not establish what the true takeover had been in the preceding periods, ever since the Appellants had acquired the business in 1999, since all the till rolls had been destroyed. In order to calculate a suppression ratio therefore, Mrs. Barnes needed to judge what the “declared” turnover would have been for the period including the early October week for which she had an accurate till record, had the officers not made their visit and put the Appellants on notice that the figures were being scrutinised. Obviously figures had not actually been returned for that period at that point. And she could not compare the declared turnover of the previous VAT period or periods with the till rolls for those periods because all the till rolls had all been destroyed. In order thus to calculate a suppression ratio, Mrs. Barnes took the turnover for equivalent October weeks that had actually been declared in the returns in the previous year, assumed growth in sales of 13%, which she said was generous and the Appellants claimed was not generous, and then calculated a suppression rate by comparing the adjusted declared turnover of the previous year’s equivalent weeks with the true turnover shown on the till roll that she had taken away.

5. Having calculated a suppression ratio of approximately 59%, she then made assessments for all periods involved with the first assessments, and beyond an additional tax payment of £4,400, that the Appellants had paid virtually immediately, the further assessments for all periods were for approximately £19,000. We understand that immediately before the hearing commenced at the VAT Tribunal, the Appellants (advised at the time by counsel) agreed a settlement with HMRC, in which the suppression ratio was reduced to 53% and in which £15,000 rather than £19,000 was paid. It was said before us that Mrs Kaur considered that this settlement exaggerated the true turnover but that she and her partner had to accept it, since without the till rolls or any other evidence of actual turnover, they were not in a position to dispute the assessment. They did however sign a declaration, drafted by HMRC, admitting to false returns and the suppression of turnover.

6. Whilst the turnover of the business was declared at a weekly figure of approximately £2,000 for a period after the first appeal, Mrs. Barnes noted that the turnover had subsequently somewhat dropped back, not to its previous low level but certainly below the £2,000 figure. She accordingly sent four officers to visit the premises on Friday, 10 October 2003 to observe the meals that people ordered, and that they themselves ordered, as test meals. Two officers were present between 12.23 p.m. and 1.07 p.m., a third between 4.50 p.m. and 5.02 p.m. and fourth officer between 5.25 p.m. and 5.50 p.m. According to the menu, the business was open on that day from 11.30 a.m. to 2.00 p.m. and from 4.30 p.m. to 10.30 p.m.

7. The officers who made each...