United Kingdom VAT & Duties Tribunals (Excise) Decisions

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URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2004/E00804.html
Cite as: [2004] UKVAT(Excise) E00804, [2004] UKVAT(Excise) E804

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Hanson v Customs and Excise [2004] UKVAT(Excise) E00804 (21 October 2004)

E00804

Assessment – Fish and Chip Shop – Under-declaration of takings – consequential under-declaration of output tax – Appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

D & T HANSON Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Lady Mitting (Chairman)

Mr A E Brown

Sitting in York on Monday 15 September 2003

Mr W Jones, Tax Practitioner for the Appellants

Mr B Haley of the Solicitor's office of HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003.


 


DECISION

1. The Appellants who carried on business in partnership as a fish and chip shop were appealing against an assessment to tax dated 1 October 2001. The assessment was initially in the sum of £6,455 cover the periods 09/99 – 03/01 inclusive. The assessment for the quarter 09/00 was agreed leaving the amount in dispute £6,124. The assessment had been raised by the Commissioners to make good an under-declaration of output tax.
2. We heard oral evidence from Mr Christopher Donkin on behalf of the Commissioners who were represented by Mr Bernard Haley. The Appellants were represented by their Tax Practitioner Mr W Jones. The Appellants themselves did not attend although Mr Jones indicated that he had been expecting them to. We enquired of him whether he was in a position to proceed with the case given their non-attendance and he stated that he was.
3. This case came to the attention of Mr Donkin when the Appellants made an application on 21 April 2001 to cancel their VAT registration on the grounds that their turnover for the coming 12 months would be below the de-registration limit (at that time £52,000). The Commissioners' concern was raised because it had only been some 2 years since the Appellants had applied for registration, at that time their estimated turnover being £100,000.
4. Mr Donkin made an unannounced visit just after the business had opened for lunch time trading on Wednesday 23 May 2001. He spoke to Mr Hanson. The only available record for inspection was the current till roll which began on the evening of Wednesday 16 May. Mr Hanson assured Mr Donkin that the till roll included all sales.
5. The till roll had commenced on the evening of Wednesday 16 May, the first complete day's takings on it being Thursday 17 May. It finished (having been removed by the Commissioners) at the closure of business on Tuesday 22 May. It was thus for not quite a complete week but it revealed takings of £1,939.50. It was immediately clear to Mr Donkin that the business was trading well above the registration threshold. Mr Donkin further noticed that there were no declared takings for the evening of Monday 20 May, there being merely 70 "no sale" readings.
6. Mr Donkin later obtained from Mr Hanson an extract from his takings book for May 2001 ("the takings record") which listed a declared takings figure on a day by day basis for the entire month. Mr Donkin's suspicions as to the accuracy of this takings record were aroused for 3 principle reasons. First, on each of the days for which he had a till roll reading, the figures were substantially different. Secondly, the figures in the takings record were quite clearly rounded. Thirdly, they were clearly estimated because, for example, 3 of the 4 Mondays were merely listed at £120. 3 of the Saturdays were listed at £200.
7. In order to complete the till roll, Mr Hanson had to estimate a figure for the lunch time takings on Wednesday 16 May and the evening takings on Monday 21 May. For the former, he took the lowest lunch time reading for all available days and added it in. For the latter, he applied an average value per sale of £2.03 being the lowest average value for any session shown on the till rolls and multiplied it by 70. Completing the till roll in this manner the total of the till roll (as made up) was £2,205.16. The total for the exact period on the takings record was £1,620, a difference of £585.16, equating to 36% of the written declared takings.
8. Mr Donkin then, in an attempt to confirm that £2,205 was a credible weekly sales figure examined the average weekly sales declared on the VAT returns. These started in the first period at £2,023 but over each succeeding period reduced giving figures of £1,089 in 12/00 and £1,308 in 03/01. The only explanation for the discrepancy which Mr Donkin was given by Mr Hanson was that in one particular week he had taken £200 to pay the rent out of the till and had forgotten to add it back in to the gross takings figure. Mr Donkin was however assured that this was a "one off".
9. As a result of these investigations, Mr Donkin was convinced that there had been an under-declaration of takings leading to an under-declaration of output tax in the VAT returns and he then set about calculating the under-declaration to lead to an assessment. He took the view that takings had probably been correctly declared in the first return (06/99) at £2,023. He therefore rounded his calculated weekly sales as per the till rolls down from £2,205 to £2,000. He then, rather than apply this figure as a percentage of declared sales, calculated arrears using a weekly base sales figure of £2,000. He did this to allow for any down turn in trade and to bring about what he believed would be an infinitely fairer result. He thus calculated a quarterly under-declaration for all periods from 09/99 to 03/01. He adjusted 09/00 for a possible period of closure of the business and this quarter was accepted by the Appellants.
10. Mr Jones did not challenge the Commissioners' calculations in any way. In fact, he said that having heard Mr Donkin, he could not fault either the figures or the calculations. He raised 2 matters which he said were by way of mitigation. First that Mr Hanson's mother, who was on duty on Monday evenings, was unable to operate the new till which was why each entry showed a "no sale". Secondly since Mr Donkin's visit a member of staff had been dismissed for theft of cash from the till.
11. Mr Jones did not dispute that there had been an under-declaration. On the basis of what we heard and the figures before us we accept that the Appellants did under-declare their takings and their output tax. Like Mr Jones, we cannot fault Mr Donkin's calculations. The figures upon which his calculations were based were the best available to him. We believe he was utterly fair to the Appellants in the manner in which he used the figures and we find his calculation to have been just and fair and the best that could be achieved on the information available. We were not addressed on best judgment by Mr Jones but for the sake of completeness we should mention that we accept that the assessment was raised to the best judgment of the Commissioners and was fair and reasonable in every way.
12. We uphold the assessment and dismiss the appeal. There was no application for costs and we make no order.

LADY MITTING

CHAIRMAN

RELEASE DATE: 21 October 2004

MAN/02/546