Car dealer was not entitled to use margin scheme

In 2018 HMRC belatedly registered the taxpayer for VAT by HMRC as a sole trader and backdated his date of registration to 1 April 2008 in line with the date when he first exceeded the sales limit. His business was the purchase and sale of second hand cars and he accepted that he had exceeded the registration threshold in 2008 and should have been registered since then.

HMRC used records provided by a car auction business to calculate the purchase value of second hand cars made by the taxpayer during that period; this figure was increased by £1 500 for 25% of the deals to reflect part-exchange arrangements with his customers. The officer then applied a mark-up of 83.49% to provide an estimated sales figure; this percentage was based on the average mark-up declared on his self-assessment tax returns. HMRC issued an assessment plus penalties based on the...