In Wholesale Clearance UK Ltd v HMRC [2016] UKFTT a company's failure to reconcile its VAT to its turnover resulted in a £17k VAT bill.  

  • The company used a firm of accountants for all routine book-keeping, including VAT Returns and accounts.
  • HMRC noticed that over a number of years the company’s accounting turnover exceeded the turnover shown on the VAT Returns.
  • Neither the company nor the accountant provided any explanation for the difference, and no documentary evidence to support the figures was produced.
  • HMRC assessed the company to an additional £17,614 VAT plus interest, after making an allowance for the company’s mix of standard and zero-rated supplies.
  • The company appealed on the grounds that the decision is ‘estimated, excessive and unsustainable’.

VATA 1994 section 73(1) provides that:

“Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act) or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.”

The First Tier Tribunal found that

  • The burden lies upon the taxpayer to establish the correct amount of tax due.
  • Once a best judgement assessment has been made, it remains correct until the taxpayer shows
    • That the assessment is wrong, and
    • The corrections that are necessary to make the assessments right or more nearly right.
  • HMRC had made an assessment based on best judgement.
  • As the company had not been able to establish that the assessments were wrong, or show what corrections should be made, the FTT had no option but to dismiss the appeal.


This case shows the importance of reconciling VAT returns to accounting turnover. A key difficulty for business owners being that they may be VAT cash accounting and their accounting turnover is calculated on an accruals basis. Many modern software packages place emphasis on cash and the fairly simple act of preparing a quarterly reconciliation is often ommitted when the client is on a fixed fee. 


Guide: Record keeping & tax: what, how and until when?

Case reference: Wholesale Clearance UK Limited v HMRC [2016] UKFTT TC05027