Background
Massala Exotic Limited operated an Indian restaurant from 2008 until January 2020. HMRC concluded that it had underdeclared takings and VAT for periods from 09/13 to 09/19, and made a best-judgment VAT assessment of £280,903. HMRC also imposed a deliberate-behaviour penalty of £176,966.37 on the company and issued a personal liability notice (PLN) making its sole director, Khosru Miah, liable for that penalty.
The company and Mr Miah appealed to the First-tier Tribunal. They said that only one of several card machines was used by Massala Exotic, while receipts through a Lloyds account related to restaurants run by associated companies. The FTT rejected that account, upheld the assessment and penalty, and upheld the PLN. It later refused permission to appeal. Mr Miah then sought permission from the Upper Tribunal.
The Court’s Holding
The Upper Tribunal refused permission to appeal on all grounds. It held that the FTT had been entitled to find that HMRC made the assessment to best judgment. For periods after June 2016, HMRC used the sales figure from the last period supported by merchant-acquirer data; the FTT had properly found that this was an empirical, reasoned approach and that information later advanced by the applicants did not affect whether the assessment was made to best judgment when made.
The Tribunal also rejected the challenge to the PLN. The FTT had applied the correct statutory test: the company penalty resulted from a deliberate inaccuracy attributable to Mr Miah. The fact that HMRC’s notice referred to the company’s insolvency or likely insolvency did not invalidate the notice. Nor was there an arguable error in attributing the whole company penalty to Mr Miah, particularly as no case for reducing that attribution had been advanced before the FTT.
Finally, the Tribunal found no arguable failure to address alleged duplication of turnover. The FTT had rejected the factual basis of that argument, finding that the Lloyds-account receipts were the company’s sales and that the alleged transfers to associated businesses were unsupported. It also refused to admit fresh witness evidence and HSBC bank statements, which had not been put before the FTT and could have been obtained or pursued earlier with reasonable diligence.
Key Takeaways
- A best-judgment VAT assessment need not be based on exhaustive HMRC investigation if it is an honest, reasoned assessment based on the material available.
- A PLN depends on the statutory conditions, including deliberate inaccuracy attributable to a company officer, rather than the recovery rationale stated in HMRC’s notice.
- An appellant cannot establish an alleged double-taxation case without reliable evidence that the disputed receipts belonged to another taxable person.
Why It Matters
The decision underlines the limited role of the Upper Tribunal on a permission application: it considers arguable errors of law, not a fresh factual hearing. Taxpayers challenging assessments based on allegedly misattributed card receipts must present supporting bank, sales, VAT and witness evidence before the FTT.
It also confirms that an officer may be made liable for 100% of a company penalty where the deliberate inaccuracy is attributable to that officer and there is no evidential basis for a different apportionment.