Suppressed cash sales declared on returns

The taxpayer operated a Chinese restaurant from March 2012 until trading ceased in November 2018. It offered an à la carte menu and eat-as-much-as-you-like buffet option. HMRC issued VAT assessments totalling £136 709 for the periods December 2012 to December 2016 to cover suppressed cash sales plus a penalty of £53 715 on the basis that the underpayments had been caused by the director’s behaviour being ‘deliberate not concealed'.

HMRC initially carried out test purchases in April and May 2016 when officers paid for meals in cash and did not request a VAT receipt. They also observed the number of on-premises and take-away customers to help establish the level of trading activity. They made an unannounced visit in November 2016 just before the close of business to observe cashing up procedures. This confirmed – when examining records for the June 2016 period – that three out of five...