In Good Choice 2016 Limited and Mrs Fang Bo Guo v HMRC [2024] TC09214, the First Tier Tribunal (FTT) upheld HMRC's VAT assessments and penalties along with Personal Liability Notices issued to the company's sole director. The company had suppressed sales and purchases. 

Chinese takeaway

Good Choice 2016 Limited was incorporated in November 2016 and ceased trading in March 2020. It operated as a Chinese takeaway under the trading name 'Oriental China' and Mrs Guo was the sole director.

  • During an HMRC inspection in May 2018, Mrs Guo was advised to ensure the company kept till records. 
  • The company Registered for VAT in May 2019.
  • HMRC began a VAT and Corporation Tax check in November 2019 and requested business records.
  • HMRC also obtained purchase data for July 2017 to January 2018 from a supplier to the company. This data showed the company made purchases from both an invoice and a cash account. Only the purchases through the invoice account had been recorded in the company's accounts.
  • Mrs Guo claimed the cash purchases had been for family use, but such cash purchases amounted to 61% of total purchases and included large quantities of containers and bags.
  • HMRC applied this suppression rate to the declared company sales and used the presumption of continuity. In turn, they used this information to raise discovery assessments 'to the best of their judgement'.
  • Appeals were made by both parties to the First Tier Tribunal (FTT) in respect of the following HMRC decisions:
    • A requirement to Register the Company for VAT from 1 July 2017.
    • VAT assessments for the two VAT periods to 11/19 of £5,743 in aggregate.
    • Discovery Assessments for three years to 30 November 2019 of £50,301 in aggregate.
    • Penalties to the company for failure to notify for VAT of £27,412 in aggregate.
    • Penalties to the company for inaccuracy in respect of Corporation Tax of £18,900 in aggregate.
    • Personal Liability Notices (PLNs) in respect of the penalties issued to the company.

The FTT found that:

  • Mrs Guo was an unreliable witness. Her evidence was inconsistent and purported medical issues did not appear to excuse the errors in reporting.
  • There was a second merchant acquirer account used for undeclared takings of the company and undeclared purchases were made.
  • The second acquirer account was in the name of Miss F Zheng, Mrs Guo's sister-in-law. Miss Zheng worked part-time in the business.
  • Turnover was not accurately recorded.
  • The appellants did not meet the burden of proof on them to displace the quantum of the assessments.
  • The behaviour which led to the insufficiency was at least careless and the assessments raised were therefore in time.
  • HMRC's charges under s.455 CTA 2010 were properly based on the amounts calculated for VAT purposes and account for the extraction of additional profits from the company.
  • For penalty assessments, the FTT agreed with HMRC that the behaviour was deliberate and confirmed the amounts raised which included a 35% mitigation factor.
  • Where penalties are assessed to a company for deliberate inaccuracies or failures, and are attributable to a director, HMRC may specify using a Personal Liability Notice (PLN) that the director shall pay some or all of the penalty. The FTT agreed the PLN was correctly issued to Mrs Guo.

The appeals were dismissed and the assessments, penalties and PLNs were upheld in full.

Useful links on this topic

Assessments: Best judgment & time limits
What is a 'best judgment' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgment assessment? What are the time limits for a VAT assessment?

Appeals: VAT
How do I appeal a VAT penalty? How can I request a Statutory Review? How do I appeal an HMRC decision?

Personal Liability Notices (PLNs)
A Personal Liability Notice (PLN) may be issued by HMRC in the event of a company's or a Limited Liability Partnership's (LLP's) failure to pay its tax debts or tax penalties to HMRC. A PLN will transfer all or part of the liability to pay the debt to one of its officers.

Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? Can HMRC issue two alternative assessments for the same period? What are your rights of appeal and defences?

Penalties (VAT)
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?

External link

Good Choice 2016 Limited and Mrs Fang Bo Guo v HMRC [2024] TC09214