Rare Tribunal mis-hit: Uppal v HMRC

/ 9 November 2020

Anthony Newgrosh

Mrs Uppal ran a chip shop.  HMRC enquired into her accounts.  It turned out that although her accounts had been drawn up on the basis that she had paid nearly £24,000 to one of her suppliers, the supplier’s records showed only some £9,000’s worth of sales to her.  And Mrs Uppal accepted that the supplier’s records were accurate: the accounts had overstated her purchases by nearly £15,000.

It’s significant that this particular supplier was paid in cash taken from the till (or, if the cash was inadequate, borrowed from Mr Uppal’s shop next door).

An open and shut case, you might think.  And that is pretty much what the Tribunal concluded:

And so it is our conclusion that the amount paid to Catering Connect was not the amount set out in the appellant’s schedule, namely £23,965.17 but the amount set out in the copy invoices supplied by Catering Connect, namely £9,215.08. The difference of £14,750 is the amount by which HMRC have adjusted the appellant’s self-assessment tax return for the 2015/2016 tax year. It is our view that this adjustment is correct. We therefore uphold that amendment and dismiss the appellant’s appeal against that amendment.

That might well be the right answer: but the decision (in Uppal v HMRC [2020] UKFTT 417 (TC)) is nonetheless a disappointing lapse.


The Tribunal thought that ‘The issue which we have to determine is whether the appellant has overstated her purchases on her 2015/2016 tax return.’  Er, wrong.  The issue the Tribunal had to determine was whether HMRC’s amendment correctly stated the amount of Mrs Uppal’s taxable profit.  That is a rather different and wider question.

Plainly, the purchases were overstated: Mrs Uppal could hardly dispute that, and she didn’t attempt to.  But she believed that the reason the purchases were overstated was that the money had been stolen by an employee or employees.  She had been absent from the business during the year on maternity leave.  During her absence the bills were paid (in cash, out of the till, remember) by staff.  She concluded that some of the money recorded as purchases had in reality been stolen.  She reported her suspicions to the police, but nothing came of it.

Now, it is perfectly possible that a Tribunal that had fully considered the question would have determined as a matter of fact that the money had not been stolen.  Or even that any amount stolen was not tax-deductible (though HMRC’s view is that losses arising as a result of staff theft are generally allowable).  But the crucial point is that once it had been raised, the Tribunal was obliged to give due consideration to the possibility.

To say, as the Tribunal did, that ‘To determine this appeal, we do not have to come to a conclusion regarding the issue of staff theft’ and that ‘all that matters is the amount actually paid to Catering Connect for the supplies made by them to the appellant’s business in 2015/2016’ is simply wrong, and a disappointing lapse.

A sad mis-hit by the Tribunal, and no credit to HMRC for acquiescing in it.

For more information, please get in touch with your usual BKL contact or use our enquiry form.

Our tax fee protection service for clients can help with the costs of an HMRC enquiry. We have more information here.

This article was also published in Tax Journal Issue 1509 and is available on the Tax Journal website.

Anthony Newgrosh

Partner, Head of Business Tax

T +44 (0)20 8922 9144
E anthony.newgrosh@bkl.co.uk

View Profile