20950

VALUE ADDED TAX – best judgment – restaurant and take away – observations by officers – volume of clients confirmed by video - appellant’s numbers used – assessment to best judgment- appeal dismissed  

MANCHESTER TRIBUNAL CENTRE

	MOHAMMED TARIQ t/a SHAMA BALTI	Appellant

	- and -

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND     CUSTOMS		Respondents

Tribunal:	DAVID S PORTER (Chairman)
		ALBAN HOLDEN  (Member)

Sitting in public in Manchester on 8 January 2009

Azeem Malik  FCCA accountant  for the Appellant

Richard Chapman of counsel instructed by the acting solicitor for the Commissioners for H M Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2009
DECISION
     The issues

1	Mohammed Tariq (“the Appellant”) appeals against the decision to assess him for Value Added Tax (VAT) due in the sum of £45,105 plus interest for VAT periods 11/04 to 03/07 inclusive as amended by the Notice of Assessment dated 17 May 2007 in the reduced sum of £42,432. The Appellant says that the Respondents have not reflected non dining casual visitors to his restaurant (as per daily diaries) in their under declaration calculations. If they had done so there would be VAT of £1397.84 due to him. The Respondents say that they have used all the available information in their calculations and that the diary figures  asserted by the Appellant’s  to be non diners are, in fact, the number of parties (groups of people) in the restaurant.

    The evidence

2	Richard Chapman of counsel appeared on behalf of Her Majesty’s Revenue and Customs and produced a bundle of document for the tribunal. The witness statement of Johanna Geldard (Mrs Geldard) an Officer of H M Revenue and Customs had not been objected to and was taken as her evidence in chief.  Mr Azeem Malik FCAA ( Mr Malik) accountant appeared on behalf of the Appellant. Oral evidence was given by the Appellant under affirmation. The Commissioners relied on an uncontested witness statement of Johanna Geldard

Preliminary issue

3.	Mr Malik applied for this appeal to be adjourned because Mr Zafar Hussain, the Appellant’s brother-in-law, had travelled to Pakistan to look after his father, who is 73 years of age and is ill. He had left for Pakistan in the middle of November and expected to remain with his father for at least another two months. Mr Malik produced a letter to the Tribunal from Mr Hussain confirming the position. He also produced a letter from Doctor Javid Iqbal in Mirpur, which stated that Mr Hussain’s father had slipped and broken his leg and was also due to have a hernia operation. Both operations had been successful by the time of the appeal and Mr Hussain senior would take 12 weeks to recover. Mr Zafar Hussain is the restaurant manager. The Appellant is the chef and has no understanding of the record keeping, accounts and operational side of the business. Mr Chapman said that there had been a pre-trial direction on 23 July 2008 which required the Appellant to produce his list of documents by 8 August 2008 and Mr Hussain’s witness statement by 31 August 2008 but neither had been produced.  It was no answer for Mr Malik to say that he had not had the opportunity to produce the statement because of a religious holiday in September and Mr Hussain’s departure to Pakistan in November. The application should be refused.

The Chairman and member retired at 11.30 am to consider the matter and after due deliberation. the Chairman refused the application. He observed that the appeal had been lodged in September 2007 and that the initial observations by the Respondents took place in September 2005. There had been adequate time for Mr Malik to obtain a witness statement from Mr Hussain, which he had been directed to do. As Mr Zafar Hussain was one of five brothers, and not the eldest, therefore there was no cultural need for him to be with his father because this duty traditionally falls to the eldest son. The Chairman directed that Mr Tariq should provided a statement now; agree it with Mr Chapman; and make it available to the Tribunal. Mr Chapman indicated that he may not be able to agree such a statement without consulting Mrs Geldard, whom he confirmed was available to attend on short notice. The Chairman stated that as the case was listed for 2 days he would be prepared to allow further time for Mr Chapman to consider the statement if that proved necessary. The tribunal adjourned to allow Mr Tariq to make the appropriate statement. The tribunal reconvened at 1.00pm.

The Facts

4.	We find the following fact:

5.	Mr Mohammed Tariq carries on business as a sole proprietor of a restaurant trading as “Shami Balti” from premises at 274 Bradford Road Fartown Huddersfield.

6.	. Mr Tariq affirmed and produced to the tribunal the statement which he had prepared and had shown to Mr Chapman. At the preliminary application for an adjournment, Mr Tariq had indicated that he was only the chef and that his brother–in-law, Mr Hussain, was responsible for looking after the adminstration and finances of the restaurant and take away. It is somewhat surprising, therefore, that in the statement prepared by the Appellant on the directions of the Chairman at the beginning of the appeal he stated:
•	I have been trading for 4 years
•	I cash up, and balance records/sales
•	I record daily sales
•	I buy all stock, etc for the restaurant
•	I pay the staff wages
•	I do the banking “

       Mr Tariq is the owner of the restaurant and familiar with its workings. It would appear that the only matter of contention, which Mr Hussain might have been able to resolve, relates to the daily diary which he maintained. We were told by Mr Tariq that he was unaware of the existence of the diary until the visit by the Respondents and he believed that Mr Hussain kept the daily details of the customers visiting the restaurant so that he could prove to Mr Tariq that he was not misappropriating some of the takings.
When interviewed in February 2007 Mr Hussein confirmed that he recorded the figures in the diary without Mr Tariqs knowledge.Further, he stated that the figures in column 2 were the number of people in the restarant(excluding takeaways), those in column 3 were the number of takeaways sold, and those in column 1 were the number of people entering the restaurant but not eating.Thus, he could calculate the number of of meals served by deducting the figure in column 1 from that in column 2.

There is no dispute as to what the figures in columns 2 and 3 represent.However, Mrs Geldard asserts that those in column 1 do not relate to non diners but rather to the number of parties (groups of people) in the restaurant. In support of her argument she points to:
•	the entries on the 14 February 2005 ( Valentines Day ) viz : 31:66:9 and suggests that most parties would be couples. Hence, 66 people entering the restaurant could reasonably be made up of 31 parties. She did not think it feasible that out of 66 people only 31 dishes would have been ordered.
•	The entries on the 26 and 27 September 2005 viz 9:29:3 and 7:18:7 were supported by CCTV footage showing 9 and 7 parties respectively entering the restaurant.
The CCTV footage has been agreed with the Appellant and his representative.
Mrs Geldard has used the actual meal bills uplifted to calculate the average price per meal of £9.17 shown in her under declaration calculations. In doing so she has divide the total spend by the number of people (covers) marked on the bills and not the number of meals sold. Mr Malik on the other hand, in a letter to HMRC dated 5 September 2007, says that from his observations and analysis the average price of a meal is £7.49 but then proceeds to use a figure of £8.25 in his alternative calculations. Neither figure corresponds to the average meal price shown in the calculations (which ignore the column 1 diary entries) attached to the letter viz £8.53.

The Law

7.	Value Added Tax Act 1994 section 73 states:
(1)	Where a person has failed to make any returns required under this Act (or under any provision repealed by this Act)or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are inaccurate or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him…………….
(6) An assessment under section (1) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following-
(b) one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment comes to their knowledge,
But (subject to that section where further evidence comes to the Commissioners’ knowledge after making the assessment under section (1) above, another assessment may be made in addition to the earlier assessment
(b) Section 77 of VATA states-
(1)	Subject to the following provisions of this section, an assessment under section 33 shall not be made-
(a)	more than 3 years after the end of the prescribed accounting period or importation or acquisition concerned.

           (c ) Value Added Tax Regulations 1965 state
(1) Every taxable person shall, for the purposes of accounting for VAT, keep the following records	
	(a)  his business and accounting records
        (b) his VAT account
        (c) copies of all VAT invoices issued by him
        (d) all VAT invoices received by him

Summing up

      Mr Chapman submitted that Mrs Geldard had given the Appellant the benefit of the doubt and had used the Appellant’s books in arriving at her assessment. Mr Tariq was unable to satisfy the tribunal as to the meaning of the first number in Mr Hussain’s diary. There is no doubt that it represented the number of tables as demonstrated by the 2005 Valentine’s Day diary entries and the CCTV footage. The Appellant had not produced any further evidenced that would throw doubt on Mrs Geldard’s figures, which were reasonable. As a result the assessment was to best judgment and should be upheld.

8.	Mr Malik submitted that the diary had been prepared by Mr Hussain, unknown to the Appellant, as protection in the event that the Appellant questioned his figures. This was a cultural matter between the brothers-in-law. Mr Ali’s average costs and his calculations were to be preferred to those of Mrs Geldard and the appeal should be allowed on the basis that the assessment was not to best judgment. 

The decision

    We have considered the facts and the law and have decided that the assessment is to best judgment. We do not accept that the Appellant was only the chef and did not understand either the diary or the finances of the Restaurant. It is not believable that Mr Hussain kept the diary for his own purposes. We are satisfied that the diary is an accurate record of the number of people eating at the restaurant and taking meals out. Having regard to the evidence adduced we are also satisfied that the first column of figures therein represents the number of tables/parties. Mrs Geldard has, in our view, used best judgement in interpreting those figures and making her calculations. We reject the Appellant’s assertion that the figures for non diners were recorded in column 1 of the diary. Consequently, we do not accept the alternative calculations and projections submitted on behalf of the Appellant. We therefore dismiss the appeal.
     Mr Chapman did not ask for any costs so none are awarded

David S Porter
 
CHAIRMAN
RELEASE DATE: 9 February 2009

MAN/07/1150
.