VAT & Best Judgement

The Upper Tribunal has refused permission to appeal in the case of Parvaiz Akhtar v HMRC, closing out a dispute over VAT assessments raised on a Glasgow off-licence.
 
HMRC visited the business by arrangement in May 2022 to check the VAT records and returns. The business ran an electronic cash register, but no journal rolls had been retained and no till data was held. HMRC were given a number of z-reading reports and little else.
 
On that basis HMRC raised assessments to best judgement. The methodology applied a sales uplift derived from representative till data, and treated a large volume of no-sale rings on the till as suppressed taxable sales.
 
The taxpayer's answer to the no-sale rings ran along three lines: the till was opened to process lottery card transactions, to provide change for local bus passengers, and because it occasionally malfunctioned. The First-tier Tribunal found those explanations illogical and unsupported by evidence, and dismissed the appeal in September 2025. On the renewed application, the Upper Tribunal refused permission to appeal.
 
The principle the Upper Tribunal restated is the one to have in mind before advising a client on the merits of a challenge. An assessment made to best judgement does not have to be as right as possible. It has to be reasonable and non-arbitrary. Once HMRC clear that threshold, the burden sits with the taxpayer to displace the quantum, and quantum is displaced with records rather than with narrative.
 
That is where cash retail businesses come unstuck. A plausible commercial explanation for repeated no-sale activity carries no weight without contemporaneous documentation to support it. If a till is opened for a purpose other than a sale, the reason needs recording at the time and the electronic data needs retaining. Once the journal rolls have gone, the taxpayer has nothing with which to meet the burden and the tribunal has no basis on which to interfere with HMRC's figures.
 
For any client running a cash-based retail operation, retention of complete electronic till data is not a housekeeping matter. It is the only realistic defence to an assessment of this kind.