In Golden Cube Limited v HMRC [2018] TC06666, HMRC's observations of sales made by a Subway franchise over a three day period failed to provide sufficient evidence to raise an assessment for undeclared takings: HMRC had ignored the evening and weekend trading.

  • Golden Cube operated a franchise of Subway.
  • Based on observations made by its officers, HMRC raised 'best judgement' assessments of £47,875 for 3 years under declared VAT relating to Food incorrectly categorised as zero-rated. 
  • Golden Cube appealed stating that the assessment was excessive.
    • HMRC had only carried out three inspections.
    • Each inspection finished mid-afternoon and did not consider evening trade or weekends.
    • Inspections were at a colder time of the year so more hot food would be consumed than normal.

HMRC accepted that there are three possible reasons for the differences in the proportion of standard rated sales for the invigilation period against the VAT returns submitted:

  • Deliberate manipulation of the records.
    • The FTT was satisfied there was no deliberate manipulation of the records.
  • Mistakes in the recording of standard rated sales, in the till entries, till programming, or the transfer of the till records to the VAT returns.
    • The tills were programmed by Subway so it is unlikely there was a problem with programming.
    • The till was a touchscreen using images, so till entry errors are likely to be minimal.
    • On the three days of invigilating there were no till entry errors and the invigilations took place at the busiest time of day when you would expect the most errors.
  • The three days of invigilating were not representative of the previous VAT return periods.

The FTT concluded that the most likely explanation based on the evidence provided was that the three days of observation were unrepresentative of the VAT periods to which they were compared. The assessment was excessive and the taxpayer’s appeal was allowed.


Food: catering and takeaway

External link Golden Cube Limited v HMRC [2018] TC06666