TC09555 - [2025] UKFTT 00748 (TC)

We derive the following findings of fact from Officer Beard’s witness statement, the documentary evidence and as a consequence of the findings made in respect of the VAT, Further VAT and Discovery Assessment.

In paragraph 25 we refer to the store table information which had been printed on the z readings up to 24 December 2013 but was not recorded thereafter. The information printed on the z readings provided HMRC with demonstrable evidence of significant (£180,342.09 or £3,680.45 on average per day) under declaration for the 01/14 VAT period also demonstrating greater daily average sales when compared to periods following the removal of that data. We consider that the removal of the data from the z reading was likely to be intended to obfuscate the suppression and thereby demonstrates deliberate behaviour by or on behalf of 3KH and the evidential start point for deliberate conduct. We consider that this finding is corroborated by a letter from the till provider which indicated that the system did not reset the store table; i.e. we conclude it was not a system failure of any sort which renders it more likely that someone with authority within 3KH took a deliberate decision to reprogram the z readings thereby removing the data from the daily records retained by the business.

We have found that there is evidence of substantial suppression of cash sales at TSM throughout the period assessed. No realistic or sensible explanation has been provided for the drop in sales between 24 December 2013 and 26 August 2017. What is apparent is consistently z readings have been programmed in a way which sought to hide suppression.

As indicated in paragraphs 28 above MJ and MB gave somewhat inconsistent evidence of their management and the role of the onsite managers. We are more inclined to accept the witness statement evidence that MJ and MB were hands on managers. We also prefer the witness statement evidence regarding the daily operation in the restaurant i.e. we consider it more likely that there was a manager on site at all points of operation with 3 managers there when open and/or busy. We find that cashing up at the end of each day was carried out by someone with the authority of 3KH as the witness statements are clear, and were supported by covert observations, that the till was operated by the cashier or a manager i.e. someone duly authorised by 3KH to perform this task (Footnote: ⁹). On the basis that a till does not get accidentally reprogrammed, and a conscious and deliberate act is also required to annotate z readings with figures that differ from the till information we are entirely satisfied that prime documents were deliberately manipulated in order that both VAT and corporation tax returns were completed to mislead HMRC.

Further, it is plain that a fixed and unevidenced proportion of sales were treated as zero-rated without any reference to actual zero-rated sales made and input tax was claimed in circumstances where purchase invoices were not retained. Again this cannot have been accidental and whether it was the directors or the accountant the behaviour is attributed to 3KH, at least for the purposes of identifying deliberate conduct.

As regards TSL we have concluded that 3KH were financially responsible for the operation of TSL and yet failed to declare sales whilst nevertheless claiming input tax. Again this can only have been a conscious decision intended to mislead HMRC.

We have no hesitation in concluding on the facts that 3KH deliberately rendered incorrect VAT returns and submitted corporation tax returns that deliberately declared an insufficiency in 3KH’s self-assessment to income tax and that deliberate conduct was demonstrated on behalf of 3KH throughout the period assessed.

Finally, and corroborating such deliberate conduct, in our view, 3KH sought to be as obstructive as possible with the intention of precluding HMRC from quantifying the under declaration. HMRC had to repeatedly visit 3KH and were met with obstruction and both formal and informal requests for information and documentation were ignored or refused. In this regard we note that 3KH does not contest that mitigation for telling (5% of a maximum of 30%) and giving (10% of a maximum of 40%).