18962
	
	VALUE ADDED TAX — assessment — grocery and off-licence business — under declaration — husband representing appellant — no challenge of dishonesty to Commissioners — assessment to best judgment — allowance for wastage and theft — reduction to assessment — appeal allowed in part

MANCHESTER TRIBUNAL CENTRE

 
 	
	MR & MRS BATH t/a BATH BROTHERS (PARTNERSHIP)	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 David S Porter (Chairman)
						 John M Lapthorne	

Sitting in public in Birmingham on 12 January 2005

Sohan Singh Bath for the Appellant 

Tariq Sadiq, of counsel, instructed by the Solicitor’s office for HM Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2005

DECISION

1.	Mrs Randhir Kaur Bath (the Appellant) appeals against two assessments for VAT dated 5 April 2001, one in the sum of £3451 plus interest, the other in the sum of £1943 plus interest.

2.	Mr Bath, the appellant’s husband, appeared for the Appellant. Mr Tariq of counsel appeared for the Commissioners, and produced a bundle of copy documents. 

Preliminary issue

3.	Neither party was aware of the case of Pegasus Birds Ltd v Commissioners of H M Customs and Excise[2004] EWCA Civ 1015.Carnwarth LJ. The chairman explained that Carnwarth LJ has set out a guidance for the Tribunals when faced with “best judgment” cases which needs to be adhered to: -

1.	The primary task for the Tribunal is to find the correct amount of tax - the burden of proof resting on the taxpayer.
2.	Any challenge to the assessment as a whole on “best judgment” must be clearly and fully stated.
3.	Any allegation of dishonesty or other wrong doing against those acting for the Commissioners should be stated unequivocally; fully particularised; and responded to in writing by the Commissioners. The Tribunal should not in any circumstances allow cross-examination of the Customs Officer concerned, until that is done.
4.	The hearing should be heard as to the amount of the assessment and where necessary any challenge to the “best of their judgment” and its consequences should be left to be dealt with at the end of the hearing

4.	The tribunal considered the position with regard to the amount of the assessment and found the following facts.

5.	Mr Bath had been the proprietor of the off-licence and grocery business in partnership with his wife but in September 1999 transferred the business to the appellant as the sole proprietor. Concurrently he ran a garment business, which closed down and Mr Bath was made bankrupt. During the period of his bankruptcy the Commissioners visited the Appellant’s off licence and grocery business and concluded that the accounts were not reconcilable with the VAT returns. They therefore raised an assessment. Messrs Bates Watson, Chartered Accountants, had acted for Mr Bath and the Appellant for some time and they were in the course of preparing the accounts for the off-licence and grocery business when Mr Bath became bankrupt. They wrote to the Commissioners on the 13 October 2000 in response to the assessment that had been raised. They agreed that there were cash differences and transfers of monies between the two businesses, which they had treated as undeclared sales. They also considered that a net margin of 15 per cent fairly depicted the trade of the off-licence and grocery business. However, in view of Mr Bath’s bankruptcy and the poor trading record of the off-licence and grocery business they were not in a position to carry out any detailed review of the business. The Accountants agreed the figures with the Commissioners on the Appellant’s behalf but without discussing them further.

6.	We are satisfied that as a result of the inability of the accountants to discuss the accounts with the Appellant, she did not have the opportunity of verifying their accuracy. 

7.	As a result of the intervention of Messrs Bates Watson the assessments were reduced to the amounts before us today. The details of the figures, which are under appeal are set out in the letter from the Commissioners to the accountants date 15 November 2000. In that letter the Commissioners reduced the assessments in relation to part of the assessments in dispute to £4484.58.

8.	Mr Bath indicated at the hearing that his wife in running the business had suffered some theft from time to time. He also confirmed that there was some wastage in the grocery section of the business as they were not able to sell all of the stock within the specified time limits. We are satisfied that there must have been some pilfering and wastage and we have decided these would represent 2 per cent of the sales. Mr Sadiq confirmed that the Commissioners had no objection to that proposal. If that percentage is applied to the total of £500,718 being the sales contained in the Commissioners letter of 15 November 2000 then the sales will be reduced by £10,014.36.  VAT on that figure, at 17.5%, produces a reduction to the assessment of £1753. We decide accordingly and require the parties to re calculate the amount due.

9.	As the Appellant had not clearly and fully challenged the assessment, nor alleged dishonesty, the tribunal decided that the assessment is to best judgment

10.	The appellant indicated that he had incurred no costs and we award none.

DAVID PORTER

MAN/02/0750

CHAIRMAN
Release Date: 24 February 2005
££Bath (t/a Bath Brithers (Partners)) v Customs and Excise [2005] UKVAT V18962 (24 February 2005)