On making a compliance visit to the company’s offices, an HMRC officer examined documents relating to its VAT affairs during a single quarter. She found that almost 30 per cent of them were missing or had been replaced with a different purchase invoice or a delivery note. When she asked to see documents relating to the preceding four years, she was told that they had been lost in a flood.

In the absence of documents to work from, the officer used her best judgment to raise an assessment against the company for £190,987 in VAT. She also imposed a £5,405 penalty on the company after forming the view that records relating to the single quarter had been deliberately tampered with.

Dismissing the company’s challenge to those bills, the FTT described its managing director as an entirely unreliable witness. It found as a fact that he was responsible for the gaps in the records examined by the officer and that it was he who had tampered with them. The FTT also found as a fact that none of the relevant documents had been destroyed in a flood.