Inadequate records to support 5% VAT charge

The taxpayer traded as a retailer selling coal fuels and confectionery from a shop in Northern Ireland. He registered for VAT in 2015 and charged 20% VAT on all sales. He did not realise until an HMRC compliance visit in 2019 that retail sales of coal up to one tonne qualified for 5% VAT under domestic de minimis rules (VATA 1994 Sch 7A Group 1 item 1). He submitted an error correction notice to HMRC for the period from January 2016 to December 2019 which HMRC rejected because he had not kept sales invoices till rolls or other records to support the reduced VAT charge. The taxpayer calculated the output tax payable on his returns – until instructed to keep proper records after HMRC’s compliance visit – by applying a mark-up to his purchase invoices. He started to keep proper records from January...