Absence of evidence to support input tax claims

The taxpayer was a groundwork contractor in the telecommunications industry.

HMRC issued an assessment covering March 2014 to March 2017 using powers of ‘best judgment’ (VATA 1994 s 73(1)) on the basis that input tax on the taxpayer’s returns had been deliberately inflated. Nine of the 12 returns for this period were repayments even though the taxpayer’s work was all standard rated.

The issue was complicated by the fact that the director could not produce any invoices or records for these periods claiming they had been destroyed in a major flood. He said the flood was in March 2016 but later revised the date to March 2017 when the officer asked why records from April 2016 to March 2017 had been destroyed in a flood that happened before these months.

The taxpayer appealed against the assessment.

The First-tier Tribunal considered the director was an ‘entirely unreliable witness’ and...