VAT best judgment and suppressed sales

The taxpayer operated a service station. After examining sales at the pumps HMRC officers concluded that the taxpayer sold 350 litres of diesel for each hour of trading from Monday to Saturday with a lower figure of 175 litres an hour sold on a Sunday. This produced a shortfall when compared with the taxpayer’s figures so HMRC raised an assessment based on the powers of ‘best judgment’ (VATA 1994 s 73(1)).

The taxpayer appealed. The trader’s accountant said the assessment was ‘grossly inaccurate and baseless’ and that all takings had been correctly declared on VAT returns. This was supported by statements from two employees who confirmed they had never seen any evidence of sales suppression or been asked by the director to reduce or exclude any sales in the till. There was also no evidence that the company had any off-record bank account where some of this money...