HMRC unable to prove suppression of sales

The taxpayer (RI) operated a fast-food takeaway business. HMRC opened an enquiry into RI’s return and reviewed the shop’s till rolls. It also conducted covert visits to the premises. It raised assessments and closure notices on the basis that profit for the ten years under review had been understated by over £750 000 with tax due of almost £300 000. RI appealed against the assessments and closure notices.

HMRC’s case was based on the fact that two tills appeared to be in operation but receipts for only one of them had been included in the accounts. RI explained that this was because he had created artificial receipts for a short period while he was trying to sell the business in order to give the impression that it was more profitable than it really was. HMRC had extrapolated figures for this short period under the presumption of continuity to produce uplifted...