HMRC's challenge to a restaurant's claim for support payments under the Eat Out to Help Out Scheme (EOHOS) failed at the First Tier Tribunal (FTT). This is the first FTT case considering the EOHOS.
In Cafe Jinnah LLP v HMRC [2024] TC09085, a restaurant appealed against HMRC's assessment which sought to recover £74,366 in support payments made under the Eat Out to Help Out Scheme (EOHOS).
- The EOHOS was in operation over five weeks in August 2020, with 13 qualifying scheme days.
- On these days, a restaurant operating the scheme was entitled to apply a discount to qualifying sales equal to the lesser of £10 per diner or 50% of the value of the customer's meal.
- This discount was claimed by way of a support payment from HMRC.
- Cafe Jinnah LLP operated the scheme and claimed five EOHOS support payments, totalling £103,351.
- Following an investigation, HMRC concluded that EOHOS support payments had been overclaimed, on the basis that Cafe Jinnah LLP had overstated payments made for meals supplied under the scheme.
- The restaurant did not use a till and relied on manual recording of customer numbers and takings on each of the scheme days.
- Unusually, HMRC argued that takings were lower than recorded by the restaurant (i.e. cash sales which had been recorded had not actually been paid in cash).
- The Limited Liability Partnership (LLP) had accounted for VAT on the declared takings and the LLP members had also paid Income Tax thereon.
- After a Statutory review, HMRC raised an Assessment for £63,766.
- Cafe Jinnah LLP Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- For an assessment to be valid, the HMRC officer had to demonstrate they had formed both a subjective and an objective opinion that the taxpayer was not entitled to the support payments.
- In this case, the HMRC officer passed the subjective test in raising the assessment.
- The officer was of the genuine opinion that the claim was overstated because he had no primary evidence of additional cash takings during scheme days.
- The HMRC officer had not been objectively reasonable.
- The officer had been told that a large number of new customers attended the restaurant on scheme days and most paid in cash. The restaurant had a capacity of 165 and on scheme days the taxpayer was able to move tables to accommodate family groups of up to 30 people.
- The working hours of banks were restricted over the claim period and it was necessary to queue for several hours to pay in cash takings. The taxpayer considered this high risk and therefore paid out more in cash expenses, including wages for additional staff, retaining the remaining cash in a secure safe on site.
- Real-Time information (RTI) records showed that employees had been paid at the end of August, but no such payment had been made from the bank account. The logical conclusion was that these wages were paid in cash.
- The LLP's balance sheet showed an increase in cash in hand.
- An analysis of purchases suggested a supply of meals to a greater extent than the additional value accepted by HMRC as evidenced by credit card receipts.
- It was unreasonable for the officer to assume that meals were paid for solely by credit card on scheme days. In correspondence, he had acknowledged that some customers would have paid in cash so he should have known his approach was flawed.
- The officer had successfully married up 25 sample bills with entries in the records. This was adequate evidence to justify the veracity of the record-keeping as a whole.
The appeal was allowed.
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Cafe Jinnah LLP v HMRC [2024] TC09085
