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No understatement: H and I Newell (t/a Tanya’s Takeaway) (TC3120)
HMRC began an enquiry into the taxpayers’ partnership return for 2006/07 – which led to the department amending the profits for several years on the basis they had been understated.
The First-tier Tribunal noted the Revenue relied on the fact the responsibility for disproving the increased profits lay with the partners.
The judge accepted the taxpayers’ claim that the firm was small and could not have produced the extra profits mooted by the tax department.
He also accepted that the profits were lower than might be expected for a similar business because of the local competition and the lack of facility for customers wishing to pay by card.
The facts did not support HMRC’s revised figures, and the tribunal concluded that the profits had not been understated.
The taxpayers’ appeal was allowed.
