Suppressed profits

The taxpayer business was a lap-dancing club. Its main sources of income arose from bar sales entry fees charges by the self-employed dancers and a fruit machine.

HMRC carried out an investigation into the club’s tax affairs found that records were inadequate and concluded the business had under-declared its takings. The department raised further assessments for corporation tax.

The taxpayer appealed.

The First-tier Tribunal said the problems in reaching an accurate figure for profits “stem from the dearth of satisfactory documentary records and credible evidence”.

The judge said the Revenue had exercised due care and diligence – and the department’s inspector had made a “conscious and conscientious effort to produce a fair result”.

In particular the official had treated extra profit as loans to directors under TA 1988 s 419 (now CTA 2010 s 455) rather than rather than as fees...