‘Uplifted several prices from the menu above the counter. Conducted quick mark-up exercise, whilst agreeing sample quantities of various purchases (namely fish) with EB. Quick mark-up exercise intimating majority of traders goods attracting mark-ups of over 500% (those with chips) , except fish ( 200%) and soft drinks (100%). …ML stated that for this business the mark-up should be at least 200% but accounts were only showing 160%. EB and GM were unable to give any satisfactory answer as to why, except for food vouchers issued, extra dripping costs and other allowances. ML and BM informed both that ‘allowances’ would be given for these items but that overall, they would not affect mark-up markedly. ML and BM informed EB that HMRC were left with no option but to carry out detailed weighted, mark-up exercise and agreed period 07/09 as representative period.’
‘Issued to Inspectors of Taxes to assist them in examining accounts. They are intended to provide a general background to the trade, with some explanation of its most important features. Business Economic Notes are not intended to provide an exhaustive or definitive picture of any particular trade or profession. …Fried fish and chips have been the traditional British “fast food” since Victorian times. Almost all shops take in raw potatoes and fish fillets and prepare and cook them on the premises. Ready prepared chips and fish are rarely utilised. Each shop’s output is accordingly the product of the individual fryer concerned and is consequently somewhat different from those of its neighbouring rivals. The (profit) margin actually achieved depends on his ability to minimise the wastage suffered while the food is prepared and sold, and to set the prices and portions best suited to his business, bearing in mind the local competition. Accordingly, the gross profit margin on sales (gross profit divided by turnover) achieved by different businesses can vary widely. In 1988 many businesses seemed to attain gross profit rates (GPRs) of about 45 percent upwards, commonly around about 50 percent, although neither figure should be regarded as a norm. Where the fryer is more efficient or has been able to establish higher prices or smaller portions than the common norm, the gross profit rate achieved can be well over 50 percent. Conversely, the less fortunate may not attain 45 percent. A fryer’s profit margin is constantly varying, reflecting the seasonal fluctuations in the quality of the potatoes and to a lesser extent, the fish purchased each month. The models below show the stages at which losses can occur during preparation, and the cumulative effect that such losses can have on yields.’
‘Once you have calculated the arrears to best judgement, you should ask yourself is this figure credible? If the amount you calculate does not pass the credibility test then your assessment may not be to best judgement. Ensure you have given enough consideration to all the facts and evidence.’
“The contention on behalf of the taxpayer in this case can be summarised by saying that on the facts before the tribunal it is clear, so it is contended, that the assessment in question was not valid because the commissioners had taken insufficient steps to ascertain the amount of tax due before making the assessment. Therefore it is important to come to a conclusion as to what are the obligations placed on the commissioners in order properly to come to a view as to the amount of tax due, to the best of their judgement. The very use of the word ‘judgement’ makes it clear that the commissioners are required to exercise their powers in such a way that they make a value judgement on the material which is before them. Clearly they must perform that function honestly and bona fide. It would be a misuse of that power if the commissioners were to decide on a figure that they knew was, or thought was, in excess of the amount which could possibly be payable, and then leave it to the taxpayer to seek, on appeal, to reduce that assessment. Secondly there must be some material before the commissioners on which they can base their judgement. If there is no material at all it would be impossible to form a judgement as to what tax is due. Thirdly it should be recognised, particularly bearing in mind the primary obligation, of the taxpayer to make the return himself, that the commissioners should not be required to do the work of the taxpayer in order to form a conclusion as to the amount of tax which, to the best of their judgement, is due. In the very nature of things frequently the relevant information will be readily available to the taxpayer, but it will be very difficult for the commissioners to obtain that information without carrying out exhaustive investigations. In my view, the use of the words ‘best of their judgement’ does not envisage the burden being placed upon the commissioners of carrying out exhaustive investigations. What the words ‘best of their judgement’ envisage, in my view, is that the commissioners will fairly consider all material before them and, on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due. As long as there is some material on which the commissioners can reasonably act, then they are not required to carry out investigations which may or may not result in further material being placed before them.”
“The element of guess-work and the almost inevitable inaccuracy in a properly made best of judgement assessment, as the cases have established, do not serve to displace the validity of the assessments which are prima facie right and remain right until the taxpayer shows that they are wrong and also shows positively what corrections should be made in order to make the assessments right or more nearly right. It is also relevant, when considering the sufficiency of evidence to displace an assessment, to remember that the facts are peculiarly within the knowledge of the taxpayer.”
“The words ‘to the best of their judgement’ permit the commissioners a margin of discretion in making an assessment; a taxpayer may only challenge the assessment if he can show that the commissioners acted outside the margin of their discretion, by acting in a way that no reasonable body of commissioners could do. In order to succeed, the taxpayer must show that the assessment was wrong in a material respect, and that if so, the mistake is such that the only fair inference is that the commissioners did not apply best judgement, as explained in Woolfe J in Van Boeckel v Customs & Excise Comrs(1981) STC 290 .”
“...theTaxes Management Act 1970 throws on the taxpayer the onus of showing that the assessments are wrong. It is the taxpayer who knows and the taxpayer who is in a position (or, if not in a position, who certainly should be in a position) to provide the right answer, and chapter and verse for the right answer, and it is idle for the tax payer to say to the Revenue, ‘Hidden somewhere in your vaults are the right answers: go thou and dig them out of the vaults.’ That is not the duty of the Revenue. If it were, it would be very onerous, very costly and a very expensive operation, the cost of which would fall entirely on the taxpayers as a body. It is the duty of every individual taxpayer to make his own return and, if challenged, to support the return he has made, or, if that return cannot be supported, to come completely clean; and if he gives no evidence whatsoever he cannot be surprised if he is finally lumbered with more than he has in fact received. It is his own fault that he is so lumbered.”
“I have referred to the judgement in some detail, because there are dangers in taking Woolf J’s analysis of the concept of ‘best judgement’ out of context. The Tribunal should not treat an assessment as invalid merely because it disagrees as to how the judgement should have been exercised. A much stronger finding is required; for example, that the assessment has been reached ‘dishonestly or vindictively or capriciously’; or is a ‘spurious estimate or guess in which all elements of judgement are missing’; or is ‘wholly unreasonable’. In substance those tests are indistinguishable from the familiar Wednesbury principles (See Associated Provincial Picture Houses ltd v Wednesbury Corp [1948 1 KB 223 ). Short of such a finding, there is no justification for setting aside the assessment.”
“The Tribunal should remember that its primary task is to find the correct amount of tax as far as possible, on the material properly available to it, the burden resting on the taxpayer. In all but very exceptional cases that should be the focus of the hearing and the Tribunal should not allow it to be diverted on an attack on the Commissioners exercise of judgement at the time of the assessment.”
“In para 44 of my judgement in Rahman (No 2) I suggested that, in cases where the tribunal had material before them from which they could see why the Commissioners made the assessment that they did and it was not apparent on the face of that material that the power to assess had not been exercised in accordance with the ‘best of judgement’ requirement, the tribunal would be well advised to concentrate on the question ‘what amount of tax is properly due from the taxpayer?’; taking the material before them as a whole and applying their own judgement ….”
“The Tribunal is not restricted to any kind of quasi-supervisory function which involved referring to the Commissioners’ judgement on quantum at the time the Commissioners made their assessment. The Tribunal’s function is truly appellate, in that it can consider further information or argument at the hearing of the appeal and reduce the amount of the assessment, thereby substituting its own view on quantum for that of the Commissioners.”
“44. It is in our view difficult if not impossible to understand why, if they are honestly declaring their takings, traders who, like the Appellants, have invested in sophisticated tills do not take care to ensure that they are used properly and correctly, that the information they produce in the form of Z-readings is accurate, and that the information is preserved. Instead, we are asked to accept that errors (which, according to the Appellants, always had the effect of increasing the recorded takings and never the reverse) were commonplace and that the few Z-readings which were available when the unannounced visit was made on12 February 1999 are unreliable. If traders fail to keep, or choose to conceal, reliable evidence of their turnover they can in our view scarcely complain that they are unable in consequence to mount an effective challenge to an assessment.”