Overstated zero-rated sales

The taxpayer traded as a restaurant in a busy entertainment complex. HMRC concluded that output tax had been deliberately understated on the company’s VAT returns. An important issue was that the officer decided that only 2% of sales were zero rated as being relevant to cold take away food compared to 12% declared in the business records. The officer issued an assessment which also included extra output tax for suppressed sales. there were other issues with input tax claims.

If HMRC thinks that output tax has been underpaid on a past return it has the power to issue a ‘best judgment’ assessment for the last four years given by VATA 1994 s 73(1).

The taxpayer appealed.

At the First-tier Tribunal it was accepted that the taxpayer made some zero-rated supplies - mainly relevant to ‘grab and go’ sales – but the tills did not distinguish the...