The power to issue a supplementary tax assessment lapses five years after the tax liability arises. Where a deferral has been granted for the filing of a tax return, this period is extended by the length of the deferral granted. The inspector argues that he imposed a supplementary tax assessment for 2011 in good time, due to a thirteen-month extension granted under the Becon scheme. However, the inspector is unable to produce any documents substantiating this extension. Furthermore, a colleague confirms that the system does not record any Becon extension for 2011. The court therefore rules that the inspector has failed to demonstrate that a formal extension was granted. The additional tax assessment for 2011 was therefore issued outside the five-year time limit for additional assessments and is set aside.
However, there is a back-payment claim for 2012 and 2013
A man operates a motor tanker as part of a partnership. The man is the captain and his partner handles the administration. The vessel transports vegetable oils, which produce 'slops' containing a valuable oil component. In 2011, a criminal investigation, codenamed 'Flip', was launched into the misappropriation of vegetable oil by skippers, which was supplied as slops to a fat trader. The man remained a suspect in this investigation until his death.
Cash payments
The Tax and Customs Administration is investigating the accounts of the fat trading firm and has established that the firm issues purchase invoices in the ship’s name for cash payments to skippers for slops delivered. The partnership’s annual accounts do not show any income from slops. The tax inspector states that the man has not included the cash payments in his tax returns. The man responds that he has no records, as the other partner was in charge of the bookkeeping. The partner states that the man received payments without the partnership’s knowledge and that no income from slops was received into the partnership’s bank account.
Administration
The man’s heirs claim that he never received the cash payments and that the fat trader’s records do not provide convincing evidence. The court ruled that the inspector had demonstrated, to a reasonable standard, that the man had received the cash payments. The inspector submitted data from the fat trading business’s accounts, including purchase invoices, delivery notes and weighbridge stamps, which are consistent with one another and confirm the described working method. Calendars and draft cash books from the fat trading business also support the flow of invoices. The court further considers it significant that the partnership did not account for any receipts for waste in the annual accounts and that the partner who kept the accounts confirmed this. The heirs’ claims are not supported by evidence. The additional tax assessments were correctly imposed and are not excessive.