Best judgment not used by HMRC

HMRC made an unannounced visits to the taxpayer’s premises to observe the takings of the business for two Friday evenings within a six-month period. The findings were then compared with the amounts reported on the corporation tax and VAT returns. As a result HMRC decided the taxpayer had been understating its sales and issued corporation tax and VAT assessments.

The taxpayer appealed saying the assessments could not be regarded as having been made to HMRC’s best judgment. No attempt had been made to consider the means of the business’s director or partner to confirm details of any alleged suppressed purchases from suppliers or the unreasonableness of the conclusions which HMC had reached given the size location and profile of the business in its local context. Further it was ‘completely unreasonable to extrapolate from the two special Fridays (Chinese new year’s eve and a midsummer pay day)...