August choice

The taxpayer operated a sandwich bar and café. She began trading in 1993. Her taxable sales exceeded the VAT registration threshold from 2000 but she was not registered.

HMRC identified the fact in 2011 and compulsorily registered her from July 2000. The department did not assess VAT for the period July 2000 to April 2003 during which period the taxpayer traded as a sandwich bar only meaning most of her sales were zero-rated as takeaway cold food.

The Revenue based the post-April 2003 split of zero-rated and standard-rated takings based on her takings in August 2011 – which showed that 72% of sales were standard rated. The taxman applied the percentage to an eight-year period to calculate output tax giving credit for input tax.

The taxpayer appealed on the basis that a one-month representative period was not adequate to calculate an eight-year output tax liability. She...