Penalties for output tax underpayments

The taxpayers traded as a convenience store. HMRC issued an assessment for underpaid output tax for periods 11/14 to 11/15 after analysing the electronic tills used by the business to record its daily takings figures. For periods 11/14 and 11/15 HMRC treated the underpayments as ‘careless’ for penalty purposes but the 2/15 to 8/15 periods were treated as being caused by the ‘deliberate’ behaviour of the partners. The penalty for deliberate behaviour is higher than for underpayments caused by carelessness.

The First-tier Tribunal dismissed the taxpayer’s appeal against the assessment for underpaid output tax ruling that it had been issued according to the ‘best judgment’ of the officer using the information that was available. The amount assessed was also deemed to be correct even though the judge noted that there were ‘some matters’ which raised questions.

HMRC has the burden of proof as far as deliberate...