Bobby Khan Enterprises Ltd & Ors v The Commissioners for HMRC
Decision date: 1 August 2022
Neutral citation: [2022] UKFTT 236 (TC)
Overall AI summary confidence: high
Short overview
This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.
AI confidence in this short overview: high
This case concerns appeals by Bobby Khan Enterprises Ltd and its directors against HMRC discovery assessments for omitted purchases/profits, VAT and taxes on alleged misappropriated funds for accounting periods 2011–2017. The First‑tier Tribunal found HMRC’s supplier data showed substantial omissions, rejected the appellants’ alternative explanations as not credible, and upheld HMRC’s methodology (using the company’s 23% mark‑up for the enquiry year, extrapolating by presumption of continuity, and making best‑judgment VAT and s455/BIK/NIC assessments), subject to limited adjustments for verified creditor claims.
Ratio decidendi
This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.
AI confidence in this ratio decidendi summary: medium
Where third‑party supplier records disclose substantial omitted purchases and the taxpayer lacks prime sales records, HMRC may reasonably apply the mark‑up used in the taxpayer’s own accounts for the enquiry year to calculate additional profits; if the discovery indicates deliberate understatement and there is no credible evidence of change or offsets, the presumption of continuity can justify extrapolating the enquiry‑year adjustment to other accounting periods.
Obiter dicta
This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.
AI confidence in this obiter dicta summary: medium
The Tribunal indicated that late allegations of third‑party wrongdoing (e.g. blaming a former employee or accountant) have little weight without contemporaneous reporting, police or commercial investigations, or independent corroboration; and that HMRC need not rely on capital statements if it adopts a reasonable, documented best‑judgment methodology and remains open to credible late evidence such as verified creditor adjustments.
Warning
- The chunk is very long and contains dense factual and evidential material; some documentary references and late evidence are summarised rather than exhaustively detailed. Notes are dense and summarised; some documentary detail and late evidence are not exhaustively set out.