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In Awards Drinks Limited (in liquidation) v HMRC [2021] EWCA Civ 1235, an appeal against a VAT best judgement failed due to a lack of credible evidence from the company and its director. Although HMRC suspected that the company was involved in tax fraud and money laundering, this did not displace the fact that the burden of proof lay on the company to explain its income.

On Appeal to the First Tier Tribunal, the burden of proof lay on Awards to provide a credible alternative explanation for the very substantial cash payments into its bank account in the UK.

Awards appealed to the Upper Tribunal on procedural points. Essentially that if there was a fraud allegation this shifted the burden of proof to HMRC. This failed to advance its case.

It appealed to the Court of Appeal, claiming that there was a misunderstanding by the Upper Tribunal of HMRC's pleaded case which resulted in procedural unfairness and it appointed a new legal team.

All Awards arguments were rejected by the Court of Appeal who found that although fraud may have been alleged there was no reversal of the burden of proof. As the company had failed to show the source of the cash deposits the assessments were valid.

Useful guides on this topic

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?

How to appeal an HMRC decision
Disagree with a 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?

Ceasing trading: What are your options?
What are your options if you are going to cease trading? What processes must be followed if you want to close down a company? What are the tax, company and insolvency law requirements?

Exit strategies: What are your options?
What are the available exit routes for a company owner who wishes to sell up and move on?

External links

Awards Drinks Limited (in liquidation) v HMRC [2021] EWCA Civ 1235


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