Mohenderjit Singh Khaira T/A Tony Fish Bar (a Partnership) v Her Majesty's Revenue & Customs

Facts

Mohenderjit Singh Khaira traded as Tony Fish Bar, a fish and chip shop in Hayes, Middlesex, registered for VAT from 21 December 1989 as a partnership on the application of Mr Sukkdev Singh Nahal, a silent partner holding 25% to Mr Khaira's 75%. The business first drew the attention of Customs in December 1991, when a local officer noticed that declared zero rated sales were around 20% when 2% to 5% was normal for such a business; the partners were directed to keep daily records of zero rated sales. Declared zero rating remained high, and a visit in September 1998 found missing 'Z' readings and cumulative grand totals exceeding declared sales. Three invigilation days in October, November and December 1998 produced takings some 45% above those declared for comparable days, zero rated sales of only 3.25%, and pitta bread purchases insufficient for the kebabs sold; a Takings Book found near the till recorded higher figures. Interviews followed in 1999. The Commissioners assessed VAT of £85,912 (revised to £81,184) plus interest of £14,369.81 for the quarters ending 31 March 1993 to 30 September 1998 under section 73(1) of the Value Added Tax Act 1994, and imposed a civil evasion penalty under section 60(1) of the Value Added Tax Act 1994 of £77,308 (amended to £77,055) after 10% mitigation. The partnership appealed.