Jade Packing Ltd v Her Majesty's Revenue & Customs

Facts

The appellant, Jade Palace Ltd, operates a Chinese restaurant in Wickford, Essex; its directors, Mr and Mrs Fung, owned 75 per cent of the shares. The Revenue opened an enquiry into the company's return for the year ended 31 January 2003 by notice dated 24 June 2004. Mrs Pauline Ackhurst, inspector of taxes, reviewed the company's records at its accountants, Connah Goldsworthy, and pursued a protracted correspondence about a £7,399 discrepancy between the cash reconciliation and the record sheets, missing meal bills for two of four test purchases, and the directors' means, no remuneration having been paid and nothing drawn from the loan account. The accountants declined to provide further information about the directors' lifestyle and asked for a closure notice. Mrs Ackhurst threatened to use her powers under section 20 of the Taxes Management Act 1970 and issued a precursor letter under section 20B(1) of the Taxes Management Act 1970 on 18 November 2005 requiring bank statements and rental documents. On 12 December 2005 the company applied to the Special Commissioners for a direction that a closure notice be given. A further enquiry into the return to 31 January 2004 was opened on 11 January 2006, and a second closure application followed on 12 April 2006.