Shahid Hussain v The Commissioners for HMRC [2026] UKFTT 1223 (TC)

[2026] UKFTT 01223 (TC)

Case No TC 09992

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 30 April 2026

Date Judgment date: 20 August 2026

By remote video

Appeal reference: TC/2024/05358

VAT registration

Before

TRIBUNAL JUDGE JUDITH HARRISON

TRIBUNAL MEMBER CHARLOTTE BARBOUR

Between

SHAHID HUSSAINAppellant

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMSRespondent

Asrar Ahmad of Chas Leigh Brown for Appellant

Heather Sercombe, litigator of HM Revenue and Customs’ Solicitor’s Office for Respondents

DECISION

Introduction

[1]With the consent of the parties, the form of the hearing was a video hearing using the Teams platform. Each person attending the hearing confirmed they were in the UK during the hearing.

[2]Ms Rennie Fabikun of HMRC attended as an observer. Mr Shahid Hussain also attended. He did not give formal evidence but answered a small number of questions from the Tribunal.

[3]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

[4]The Tribunal was provided with a bundle of 236 pages.

CONCLUSION

[5]CONCLUSION The Tribunal decided to allow the appeal. As a result, the VAT assessments and penalties raised by HMRC fall away.

Background

[6]Background This is an appeal under section 83(1)(a) of the Value Added Tax Act 1994 (“VATA”) against HMRC’s decision to register Mr Hussain for VAT with effect from 1 October 2017. HMRC has issued VAT assessments under section 73(1) VATA of £32,579 for the period 6 April 2013 to 31 August 2017 and assessed associated penalties of £22,805. HMRC accept that should Mr Hussain succeed in his appeal against his VAT registration, the VAT and penalties will fall away.

[7]HMRC’s case is as follows:(a) Mr Hussain owned and ran a takeaway called “Your Spiced” located at 110 High Street, Dumbarton G82 1PA between 6 April 2013 and 31 August 2017.

(b) In this period, based on the information available, Mr Hussain’s turnover was £382,032 and Mr Hussain was liable to VAT as a result.

[8]Mr Hussain’s case is as follows:(a) From 1 February 2015, the takeaway was owned and run by a company who employed Mr Hussain.

(b) There is no evidence that the turnover of the takeaway ever exceeded the VAT registration threshold in any relevant year.

Issues

[9]The issues for determination are:(a) Whether HMRC correctly determined that Mr Hussain was required to be registered for VAT; and

(b) Whether Mr Hussain carried on the takeaway business during that period so that its turnover should be attributed to him.

Background facts

[10]The Tribunal makes the following findings of facts.

[11]On 28 July 2016 HMRC issued a notice of inspection letter to Mr Hussain advising that they would be carrying out a visit to the business premises between 11 August and 20 August 2016.

[12]This visit took place on 19 August 2016. HMRC officers noted that the business had a Hungry House terminal, a Just Eat terminal, and an open till drawer. An environmental certificate on the wall identified Mr Hussain as the owner of the business. A worker behind the counter told HMRC that Mr Hussain was the owner of the business and connected Mr Hussain with the HMRC officers over the telephone. Mr Hussain told HMRC that he would not be in the takeaway business that day and declined to allow HMRC to carry out the inspection.

[13]On 5 September 2016, HMRC wrote to Mr Hussain asking him to provide his VAT registration number and various business records.

[14]On 25 October 2016, HMRC wrote to Mr Hussain again asking for the requested documents.

[15]On 26 January 2017, a penalty notice was issued to Mr Hussain as the documents had not been provided.

[16]On 20 March 2017 and 28 March 2017, HMRC attempted to contact Mr Hussain by phone and left messages for him.

[17]On 5 April 2017, a further penalty notice was issued to Mr Hussain charging daily penalties between 27 January 2017 to 5 April 2017.

[18]On 19 April 2017, HMRC received a call from Ahmad Sheikh & Co (at that time Mr Hussain’s agent) asking for more time to produce the requested documents. This was agreed by HMRC.

[19]On 24 May 2017, 1 June 2017 and 6 June 2017 HMRC attempted to contact Ahmad Sheikh & Co by phone and left messages for them.

[20]On 7 June 2017, a telephone call was received from Ahmad Sheikh & Co. In this call HMRC were told that Ahmad Skeikh & Co were acting for YSD Trading Limited and that the business ceased trading from the end of March 2017. HMRC advised Ahmad Sheikh & Co that the documents were still required.

[21]On 15 June 2017, HMRC spoke to a man who identified himself as Mr Hussain’s son and left a message for Mr Hussain.

[22]On 22 June 2017 further penalties were issued to Mr Hussain for non-compliance with the request to provide documents.

[23]On 24 August 2017, HMRC visited the takeaway premises. Mr Hussain was not initially present. HMRC returned later that day when Mr Hussain was present. Mr Hussain told HMRC that he was the owner of the takeaway business and that the takeaway was run by Muta Foods and he was employed as the manager. HMRC noted that the Food Hygiene and Food Excellence certificates were in Mr Hussain’s name. Mr Hussain refused to allow HMRC to inspect the till or the food delivery terminals.

[24]On 28 August 2017, West Dunbartonshire Council confirmed to HMRC that the current occupants of 110 High Street, Dumbarton G82 1PA, was Mr Hussain and he had occupied the premises since 28 March 2013.

[25]On 31 August 2017, HMRC wrote to Mr Hussain to inform him that due to HMRC being unable to get hold of Mr Hussain, and Ahmad Sheikh & Co not answering their phone or returning HMRC’s calls, HMRC had decided to assess him for VAT based on the information available to them. The letter explained that HMRC considered Mr Hussain to have been operating Your Spiced as a sole trader since April 2013 until the present day. As a result, HMRC had decided to register Mr Hussain for VAT with effect from 1 October 2017 and would be issuing VAT assessments based on the figures in Mr Hussain’s income tax returns, and using the retail price index to bring the figures up to date. This letter explained that HMRC considered that the turnover of the take away from 6 April 2013 to 31 August 2017 was approximately £382,032 and, using the Flat Rate Scheme percentage of 12.5% for catering including restaurants and takeaways, the VAT due was £32,579.

[26]On 31 October 2017, a penalty explanation letter was issued by HMRC to Mr Hussain charging a penalty of £22,805.30.

[27]On 5 March 2019, Chas, Leigh Brown & Son wrote to HMRC explaining they were now Mr Hussain’s agents. This letter explained that Mr Hussain was self-employed between 6 April 2013 and 31 January 2015, and that from 1 February 2015 he has had a variety of employments. Mr Hussain’s agents asked HMRC to provide them with information evidencing why Mr Hussain was liable to register for VAT and copies of the VAT liability workings.

[28]Despite Chas, Leigh Brown & Sons chasing, HMRC accept that HMRC did not respond until 26 July 2024. In this response, HMRC explained that they had gathered information from their visits to Your Spiced and crossed-referenced this information with Mr Hussain’s income tax returns in order to decide that he should be VAT registered. The letter also stated that HMRC did not have the VAT liability workings and suggested that the debt management department may be able to provide these to Mr Hussain.

[29]Both HMRC and Mr Hussain accepted that he owned and ran the takeaway as a sole trader until 31 January 2015.

[30]From 1 February 2015, HMRC and Mr Hussain did not agree who owned and ran the takeaway. HMRC’s position was that Mr Hussain had continued to own and run the takeaway. Mr Hussain’s position was that:(a) He had transferred the takeaway business to YSD Trading Limited (a company that was wholly owned by Mr Hussain, and of which he was the sole director), such that from 1 February 2015 YSD Trading Limited began to own and run the takeaway business and that Mr Hussain was employed by YSD Trading Limited to work in the takeaway business.

(b) The takeaway business was transferred on 31 March 2017 by YSD Trading Limited to Muta Foods Limited, a company owned by a third party, Mr Uddin. Mr Hussain continued to work at the takeaway as an employee of Muta Foods.

[31]Mr Ahmad submitted that Mr Hussain transferred the business to YSD Trading Limited through a sub-lease agreement that Mr Ahmad had a copy of. Mr Ahmad submitted to the Tribunal that the effect of this agreement was to transfer the takeaway business to YSD Trading Limited. This agreement has never been provided to either HMRC or the Tribunal.

[32]YSD Trading Limited was wholly owned by Mr Hussain who was the sole director of the company.

[33]No evidence was placed before the Tribunal to suggest that YSD Trading Limited had ever filed any corporation tax returns.

[34]Mr Hussain’s income tax returns show that:(a) His turnover was £77,957 in 2013/2014

(b) His turnover was £65,182 in 2014/2015.

(d) He had employment income of £1,340 from YSD Trading Limited in 2014/2015.

[35]Mr Ahmad told the Tribunal that HMRC had never enquired into Mr Hussain’s income tax returns.

[36]Mr Hussain has P60 (end of year certificates) that show:(a) He had employment income of £1,340 from YSD Trading Limited in 2014/2015.

(b) He had employment income of £8,016 from YSD Trading Limited in 2015/2016.

(d) He had employment income of £9,360 from Muta Foods Limited in 2017/2018

[37]The Tribunal was not provided with any workings for the VAT registration figures. Ms Sercombe submitted to the Tribunal that her understanding is that the way the turnover figures had been calculated was to take the turnover from Mr Hussain’s income tax returns, for each year add the amount of sales through the Just Eat platform and then increase the figure by the retail prices index going forward. Ms Sercombe did not know why HMRC had taken the view that the Just Eat turnover was not included in the income tax return figures. Mr Ahmad told the Tribunal that the Just Eat turnover was included in the income tax returns figures. Mr Hussain did not provide any comment on whether the Just Eat turnover was included in the income tax figures.

[38]The Tribunal has been provided with undated case notes from HMRC (which appear to have been created between 21 June 2017 and 23 August 2017) which state that in assessing when the VAT threshold was breached, HMRC assumed that Mr Hussain earnt his turnover of £65,182 during a 9-month period in the 2014/2015 tax year. The effect of this is that HMRC say that Mr Hussain become liable to register for VAT with effect from 1 October 2017.

The law

[39]The law The relevant law is contained in VATA. The relevant provisions are as follows:

“Section 3 Taxable persons and registration (1) A person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act. (2) Schedule 1 … shall have effect with respect to registration. Schedule 1 Liability to be registered (1) Subject to sub-paragraphs (3) to (7) below, a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule— (a) at the end of any month, if the person is UK-established and the value of his taxable supplies in the period of one year then ending has exceeded £[a figure which has changed over the years]; or … (3) A person does not become liable to be registered by virtue of sub-paragraph (1)(a) … above if the Commissioners are satisfied that the value of his taxable supplies in the period of one year beginning at the time at which, apart from this sub-paragraph, he would become liable to be registered will not exceed [a figure slightly lower than that in sub-paragraph (1)(a)]. … (7) In determining the value of a person’s supplies for the purposes of sub-paragraph (1) … above, supplies of goods or services that are capital assets of the business in the course or furtherance of which they are supplied and any taxable supplies which would not be taxable supplies apart from section 7(4) shall be disregarded. … (10) A person is “UK-established” if the person has a business establishment, or some other fixed establishment, in the United Kingdom in relation to a business carried on by the person. Notification of liability and registration (1) A person who becomes liable to be registered by virtue of paragraph 1(1)(a) above shall notify the Commissioners of the liability within 30 days of the end of the relevant month. (2) The Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the month following the relevant month or from such earlier date as may be agreed between them and him. (3) In this paragraph “the relevant month”, in relation to a person who becomes liable to be registered by virtue of paragraph 1(1)(a) above, means the month at the end of which he becomes liable to be so registered. Section 83 Appeals (1) Subject to sections 83G and 84 , an appeal shall lie to the tribunal with respect to any of the following matters— (a) the registration or cancellation of registration of any person under this Act;”

Schedule 1 Liability to be registered Notification of liability and registration Section 83 Appeals

discussion

[40]The Tribunal must decide, on the balance of probabilities, whether Mr Hussain’s turnover in any rolling 12-month period exceeded the VAT registration threshold.

[41]The Tribunal finds, on the balance of probabilities, that the turnover of the takeaway business was under the VAT threshold. This is because the Tribunal finds as a fact that the takeaway business (regardless of whether owned by Mr Hussain, YSD Trading Limited or Muta Foods Limited) had a turnover that was less than the VAT threshold in each relevant period.

[42]The Tribunal had limited information before it to assess whether the takeaway business’ turnover exceeded the VAT threshold. Mr Hussain relied on the numbers in his income tax returns as evidence for the level of turnover, albeit these only cover a two-year period. Mr Ahmad told the Tribunal that the figures in those returns had not been challenged, which the Tribunal accepts since HMRC did not have the information available to either confirm or dispute that. Although the income tax returns cover only two years, they provide the only contemporaneous records of turnover. In the absence of persuasive contrary evidence, the Tribunal accepts these as the best available evidence of the takeaway business’ likely turnover.

[43]HMRC told the Tribunal that the turnover figures had been calculated by taking the figures from the income tax returns, adding the Just Eat sales and then applying a retail price index mark-up to obtain the estimated turnover for each period. HMRC were unable to explain why Just Eat sales should be added to the figures in the income tax returns, nor why sales from other delivery platforms appeared to have been treated differently. Although HMRC’s assessments carry a presumption of validity, the Tribunal must evaluate the evidence as a whole. In this case, the absence of supporting workings significantly weakens HMRC’s position. In the absence of a coherent explanation or evidential foundation, the Tribunal is unable to place weight on HMRC’s methodology. The assessments are therefore not supported by sufficiently reliable evidence.

[44]In light of this conclusion, it is unnecessary to determine whether Mr Hussain personally carried on the business during the entire period. Even if HMRC were correct on that issue, the turnover would not have exceeded the registration threshold.

Conclusion

[45]Conclusion For these reasons, the Tribunal concludes that the turnover of the takeaway business did not exceed the VAT registration threshold at any relevant time. HMRC’s assessments are not supported by sufficiently reliable evidence and cannot be sustained.

[46]The appeal is therefore allowed. The VAT assessments and associated penalties are set aside.

Right to apply for permission to appeal

[47]Right to apply for permission to appeal 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. Release date: 20 August 2026