Timing and best judgment

HMRC became aware of the taxpayer’s trading arrangements in 2014 after he pleaded guilty to 27 charges under the Trade Marks Act of selling £427 422 of counterfeit car parts between January 2008 and February 2012. The department did a simple calculation based on 49 months of trading and £427 000 of total sales giving average monthly sales of £8 714. So he would have exceeded the registration threshold in August 2008 producing an effective date of registration of 1 October 2008 – the threshold at the time was £64 000. 

HMRC calculated his VAT liability for the period October 2008 to February 2012 as £45 299; this allowed 15% of his total output tax figure to be claimed as input tax. It also issued a late registration penalty for £6 303. 

The taxpayer appealed. He said the figure of £427 000 was wrong because it included sales of personal...