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The taxpayers a husband and wife who were in business together bought second-hand cars which they insured and then licensed to local taxi drivers for a fee of £120 a week for a maximum 12-hour shift each day. All the drivers worked for one local firm Bounds Taxis.
The taxpayers were responsible for repairing and maintaining the vehicles but the drivers had to pay for fuel. The maximum potential income for each car was £240 a week.
As a result of an enquiry into the taxpayers’ tax returns HMRC alleged the couple had under-declared their profits and the department issued discovery assessments to collect the outstanding tax.
The increased profits meant the taxpayers should have registered for VAT so best-judgment assessments for VAT were also made and penalties imposed.
The taxpayers...
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