The taxpayer was the proprietor of a restaurant supply business. HM Revenue and Customs (HMRC) opened an enquiry into the taxpayer’s tax return for 2008/09 (under TMA 1970, s 9A).
Following a series of meetings with the taxpayer and his accountants, HMRC concluded that adjustments were required to business profits in respect of certain missing purchase invoices and petrol receipts; a balancing figure of £9,264 described by the taxpayer's accountants as ‘capital introduced’; and an unidentified cheque deposit of £1,625.
HMRC issued a closure notice reflecting the above adjustments, and a penalty of 22.5% was assessed. Agreement was confirmed by the taxpayer to the adjustment in respect of the purchase invoices and petrol receipts, but not to the other two adjustments. The taxpayer appealed.
The First-tier Tribunal (FTT) considered (following Nicholson v Morris [1976] STC 269)
