‘Sweet and Sour Tax’ by Keith Gordon, Barrister at Temple Tax Chambers

Keith Gordon focuses on a Tribunal case in which HMRC failed to satisfactorily back up its supposition that a Chinese restaurant was not playing by the book.

In many back duty investigations there is often a sense that the HMRC officer feels pretty sure that profits have not been accounted for, but quantifying the shortfall is very much down to guesswork and the need for some estimation will usually be inevitable.

In the VAT code, the legislation makes it clear that the officer is required to do no more than exercise ‘best judgment’ when determining how much to assess for. And this ‘best judgment’ requirement is implicit within the direct tax code.

However, once an assessment is made, a taxpayer will generally need to do more than prove that the assessment is for an incorrect amount: to displace the assessment, the taxpayer will actually need to demonstrate that a different figure is better.

The recent First-tier decision in the case of Kong’s Restaurant Ltd v HMRC [2021] UKFTT 220 (TC) demonstrates these how principles can operate in practice.

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