Khan (t/a Cafe Aroma) v Revenue and Customs (VAT - ASSESSMENTS : Best judgment) [2016] UKFTT 639 (TC)

FTT-Tax
Khan (t/a Cafe Aroma) v Revenue and Customs (VAT - ASSESSMENTS : Best judgment)
[2016] UKFTT 639 (TC) · 2016-09-09
[7]In Khan v HMR C [2006] EWCA Civ 89 , Carnwath LJ (as he then was) said, at [69] “The position on an appeal against a "best of judgment" assessment is well-established. The burden lies on the taxpayer to establish the correct amount of tax due:
"The element of guess-work and the almost unavoidable inaccuracy in a properly made best of judgment 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." ( Bi-Flex Caribbean Ltd v Board of Inland Revenue (1990) 63 TC 515, 522-3 PC per Lord Lowry). That was confirmed by this court, after a detailed review of the authorities, in Customs and Excise Commissioners v Pegasus Birds Ltd [2004] STC 1509 ; [200 4] EWCA Civ 1015. We also cautioned against allowing such an appeal routinely to become an investigation of the bona fides or rationality of the "best of judgment" assessment made by Customs: "
The tribunal should remember that its primary task is to find the correct amount of tax, so 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 into an attack on the Commissioners' exercise of judgment at the time of the assessment." (para 38(i)) It should be noted that this burden of proof does not change merely because allegations of fraud may be involved (see e.g. Brady v Group Lotus Car Companies plc [1987] STC 635, 642 per Mustill LJ).” Discussion and Conclusion 12. As it is accepted that the VAT returns are incorrect the primary task of Tribunal is to find the correct amount of tax. The starting point being, as Carnwath LJ observed, the assessments are prima facie right and it is for the taxpayer to show that they are wrong or show positively what corrections should be made to make the assessments right or more nearly right. 13. For Mrs Khan, Mr Wahid Khan of J K Accountancy, submits that the assessments should have been calculated on a basis of daily takings of £260 of which 12% relate to zero-rated supplies. However, unlike the assessments made by Officer Rogers which are based on the results of the invigilation exercise of 26 June 2013, this is not supported by evidence. 14. While we accept the submission of Mr Haley, for HMRC, that as the assessments are based on declared turnover that any reduction for University vacations, Ramadan and closures will be reflected in the assessments we note that the takings for Wednesday 27 March 2013 recorded by Officer Rogers in the schedule of takings from records (ie the Green Book) as £537.24 was recorded in a separate schedule of ‘Wednesday Takings’ for the purposes of calculating the average Wednesday takings as £237. Although Mr Hayley, on instructions, explained that the correct figure was £237 and not £537.24 it was not possible at the hearing to check that this was the case and, as such, we are concerned on the effect that this could have on the rate of under declaration and the assessments. 15. It was therefore agreed that as the figure was as recorded in the Green Book Mr Khan would confirm the correct figure and notify the Tribunal and HMRC accordingly. Also, because of the omission of any reference to Sunday 31 March 2013 in the schedule of ‘Wednesday Takings’ a short adjournment was necessary to enable the parties to verify that only Wednesday takings had been included in the assessment calculation. However, given that Saturday 30 March 2014 is followed in the schedule by Monday 1 April 2013 we are able to accept the assurances of Mr Haley that this was the case. 16. Subject to clarification of the daily takings for Wednesday 27 March 2013, we consider that, in the absence of any positive correction to the assessments advanced on behalf of Mrs Khan, the assessments are in principle right. Therefore, unless Mr Khan is able to confirm to the Tribunal and HMRC within 14 days from the date of this decision, with a copy of the relevant entry in the Green Book, that the daily takings for Wednesday 27 March 2014 was £537.24 we dismiss the appeal and confirm the assessments as stated. 17. If, however, such confirmation is provided within 14 days although the appeal is dismissed the assessments shall be reduced accordingly. In such circumstances we direct the parties to use their best endeavours to determine the figures in respect of the assessments. However, should this not prove possible an application may be made to the Tribunal for this purpose, with any such application to be made within 28 days of the release of this decision. Right to apply for permission to appeal 18. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. JOHN BROOKS TRIBUNAL JUDGE RELEASE DATE: 14 SEPTEMBER 2016