In the Great British Takeaway v HMRC [2022] TC8584, a fish and chip shop failed to overturn a sizeable VAT assessment, including tax penalties levied at 50% of lost tax. The business's owners failed to convince HMRC that it had a reliable daily till reconciliation process and witness evidence proved unreliable and inadmissible.

  • The Bristol takeaway was subject to a VAT compliance visit by HMRC, who interrogated the till.
  • HMRC also ran a 'cashing up' exercise over the course of the day with the owners' consent and this produced an £860 odd difference between actual and recorded takings.
  • Till totals did not match up to reported VAT returns and one of the owners appeared to make unexplained adjustments to daily takings.
  • The owners were unable to provide any evidence as to why turnover was underreported.
  • HMRC extrapolated the difference to raise VAT 'best judgement' assessments for £109,157 with Penalties for Errors of £49,665.94
  • The company Appealed against both the assessments to the FTT.

The FTT considered the VAT best judgement assessments, and:

  • Discounted written evidence from the company's directors. They had failed to follow tribunal rules which require a 'statement of truth'.
  • Noted that a director gave inconsistent statements from the witness box which lacked credibility.

Before confirming the amount of HMRC's assessment

In examining the tax penalties charged for error or mistake, the FTT considered reductions for disclosure:

  • The disclosure was 'prompted', the maximum penalty for a deliberate error without concealment is 70% and the minimum 35%.
  • The FTT considered reductions awarded by as follows:

(1) For 'telling', 10% out of a possible 30%, some information was provided no information was given by the directors as to the true basis or methodology of their suppression of takings.
(2) For 'helping', 30% out of a possible 40%, the directors had allowed inspection of records and attended meetings, but had not “actively engaged in quantifying the inaccuracies or volunteered any information relevant to the disclosure”.
(3) For 'giving', 30% out of a possible 30%, because the company had promptly responded to requests for information and documents.

It concluded that the penalties were appropriate to the offences.

The company's appeals were dismissed.

Useful guides on this topic

VAT Assessments Best Judgement
What is a 'best judgement' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgement assessment?

Penalties for error or mistake
What penalties apply if you make an error or mistake in a tax return, or fail to notify HMRC of an under-assessment? How are penalties calculated? How do you check penalties? What can you do if you receive a penalty?

How to appeal a decision of HMRC
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

How to appeal a tax penalty
How do you appeal against a tax penalty? What are your rights of appeal if HM Revenue & Customs (HMRC) have assessed you for a tax penalty? 

A beginner's guide to VAT
VAT: Where do I start? What is VAT? Who has to register for VAT? What rate should you charge? How do you calculate VAT? When are your VAT filing obligations?

External links

Great British Takeaway v HMRC [2022] TC8584

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