RSK Cars Limited v The Commissioners for HMRC

Introduction

1. This is an appeal brought by the Appellant against: (a) VAT assessments issued on 14 February 2023 under section 73(1) Value Added Tax Act 1994 (“VATA 94”) in the total sum of £90,953 for VAT quarters 2/19 to 5/22 inclusive. (b) Penalties for careless inaccuracies in VAT returns under Schedule 24 Finance Act 2007 (“Schedule 24”), in the total sum of £20,341.03. Whilst the Appellant accepts that a careless penalty should be imposed, the decision not to suspend the penalty is disputed. A challenge to the amount of the penalty is inferred from the appeal against the underlying assessments.

2. HMRC’s case in essence is that the Appellant (a) had not fulfilled the conditions in order to be eligible to use the second-hand car margin scheme, leading to an understatement of tax; and (b) as a result, the Appellant’s VAT returns contained careless inaccuracies, and the penalties imposed should not be suspended as the Appellant had been unable or unwilling to identify appropriate suspension conditions.

3. Review conclusion letters were issued on 16 June 2023. On 21 July 2023, the Appellant notified their appeal to the Tribunal. The appeal was out of time by five days. The reason given for the lateness is that the Appellant’s representative (“Doshi Accountants”) had not become aware of the review conclusions until 29 June 2023. Given the relatively short delay, HMRC do not object to the appeal proceeding out of time.

4. The Appellant’s grounds of appeal are quoted in full below: “HMRC Officer Grandison has not considered the practical side as to what VAT liability would be occurred on a second hand car margin scheme. We have re-done the VAT calculations for each quarter, period 02/09 to 05/22 and the liability comes to £15099.42 compared to the original £ 19189.70 filed. The VAT Calculations are attached.”

5. We do not intend to set out every aspect of the procedural history of this case, but wish to note that this appeal has been plagued by serious non-compliance of the Tribunal’s directions by the Appellant and/or its representatives, Doshi Accountants. The dates by which certain directions should have been complied with were missed by a wide margin. Certain directions were simply not complied with at all.

6. Another feature of this case is that the Appellant and/or its representatives, Doshi Accountants, have failed to grapple with the nub of this appeal, namely, whether the Appellant had fulfilled the conditions in order to be eligible to use the Second-Hand Margin Scheme until late in these proceedings.

7. The grounds of appeal set out in the notice of appeal are brief. HMRC have attempted to elicit better and further particulars from the Appellant, stating that the Appellant had provided wholly insufficient grounds against the VAT assessment and penalty.

8. The Tribunal issued directions on 15 December 2023 for the appellant to provide further and better particulars for their grounds of appeal by 15 January 2024. The Appellant did not comply. Further directions were issued on 31 January 2024, extending the time for the Appellant to provide further and better particulars within 14 days of the date of the letter. Again, the Appellant did not comply.

9. On 15 May 2024, Doshi Accountants wrote to HMRC, repeating that “Mr Grandison has not considered the practical side of the sales as to what VAT liability would be occurred on a second hand cars VAT margin scheme…We disagree with the Assessment raised for £90,953 as the VAT output has been raised on the gross sales and not on the basis of 2 nd hand cars margin VAT scheme, where the output is declared on the basis of profit for the sale of cars and not on the basis of gross selling price of the cars, which officer has calculated…”

10. On 18 June 2024, Doshi Accountants wrote to HMRC, repeating that the Appellant’s grounds of appeal were, in brief, that HMRC had not considered the VAT workings on the basis of the second-hand margin scheme. No attempt was made to address the nub of this appeal, namely, whether the Appellant had indeed fulfilled the conditions in order to be eligible to use the Second-Hand Margin Scheme.

11. On 1 July 2024, HMRC made representations to the Tribunal, stating that whilst the Appellant (via Mr Doshi) had provided spreadsheets to support the margin scheme calculations, apart from statements to the effect that the margin scheme applied, had provided no reason why the Appellant was eligible to use the scheme, contrary to HMRC’s decision.

12. On 31 July 2024, the Tribunal directed the Appellant to set out the basis on which it considered that it met the criteria to be entitled to use the Second-Hand Margin Scheme within 14 days. The Appellant’s representatives emailed on 30 July 2024, referring to a HMRC printout as to who is eligible to use the scheme, with a manuscript tick against a paragraph in that document which appeared wholly unrelated to the Appellant’s business, and that “we believe RSK Cars Ltd are eligible to calculate their VAT liability upon this basis.”

13. In one of the emails of 30 July 2024, the Appellant's Representative also contended that the original returns were inaccurate to the extent that the Appellant overstated its original liabilities. The Tribunal was therefore asked to reduce the assessments to negative amounts (to effect a refund). No error correction notice, however, had been submitted by the Appellant, and no decision on a claim made by the Respondents.

14. On 18th September 2024, the Tribunal (Tribunal Judge Bailey) directed as follows: “The Appellant has stated that the basis on which it considers it is entitled to use the VAT margin scheme for second hand cars is that it buys and sells second hand cars. That must be taken as the entirety of the Appellant's case on this point. With respect to the penalty, the position is the same. The Appellant's position is that it accepts its behaviour was careless and that all other criteria for imposing a penalty are met but argues that the penalty should be suspended without the Appellant being required to engage with HMRC in suggesting any suspension condition which would be appropriate in the circumstances of its case. … With regard to revised figures which suggest a VAT repayment for the periods assessed, the Respondents are correct to note that an error correction claim is required for any such period. The Tribunal does not have the jurisdiction to reduce an assessment below zero.” The Tribunal correspondence of 18th September 2024 confirms the Tribunal does not have jurisdiction to reduce an assessment below zero, and that an error correction claim would be required for any such period. The Respondents have received no such claims.”

15. On 18 December 2024, the Tribunal gave substantive directions for the preparation of this hearing. Pursuant to those directions, inter alia , the parties were required to provide list of documents by 31 January 2025, witness statements by 28 February 2025 and skeleton arguments no later than 21 days before this hearing. The Appellant’s representatives were late with the provision of their list of documents. No witness statements have been filed.

16. Doshi Accountants sent an email to the Tribunal and HMRC on 7 September 2025, after the due date for the filing of skeleton arguments, stating that they would be provide their skeleton argument by 17 September 2025.

17. On 9 September 2025, the Tribunal (Judge Williams) directed as follows: “In the absence of a detailed and substantive application by the Appellant for permission to rely upon additional documents, a new and late witness statement and a skeleton argument raising arguments excluded by the Tribunal Directions dated 18 September 2024 I consider it in furtherance of the overriding objective to deal with cases fairly and justly to GRANT HMRC’s application and DIRECT:

1. No further documentary evidence from the Appellant be admitted;

2. No witness evidence from the Appellant’s Director be admitted; and

3. Arguments made in the Appellant’s Skeleton Argument that exceed the grounds permitted in the Tribunal’s correspondence / directions of 18th September 2024 be disregarded. Any objection by the Appellant to the Directions will be dealt with as a preliminary issue at the hearing on 25 September 2025.”

18. As noted above, the Appellant has not provided any witness statements. No skeleton argument has been provided by or on behalf of the Appellant either, notwithstanding the assurances provide by Doshi Accountants in their email of 7 September 2025 that one would be filed by 17 September. Preliminary Issues

19. On 24 September 2025, the day before the hearing, the Tribunal received several emails in the afternoon and into the late evening from Doshi Accountants, with numerous attachments containing further documents upon which they sought to rely.

20. At the outset of this hearing, the Tribunal was therefore required to deal with two applications from Doshi Accountants on behalf of the Appellant: (a) The first being an application to admit additional documents in a PDF bundle running to 427 pages, sent to the Tribunal and HMRC yesterday, 24 September 2025, by way of email timed at 12.42 pm. (b) The second being an application to admit what is described as a “Stock Book” covering VAT periods 11/22 to 05/25 (so not relevant to the periods under appeal) sent to the Tribunal and HMRC yesterday by email at 4.37 pm.

21. We have given a short extempore oral judgment dealing with these applications. For the reasons which we have expressed in that judgment, we refused the second application to admit what is described as the “Stock Book”, but granted the first application for permission for the inclusion of the additional documents in the PDF bundle. Those documents had been provided to HMRC by the Appellant in July and August 2024, and the emails to which they were attached were referred to in the Appellant’s list of documents. However, unfortunately, the documents had not been included by HMRC in the document bundle.

22. It is also highly regrettable that the applications themselves were made so late in the day, particularly given that Doshi Accountants have been involved in assisting the Appellant with this appeal since late December 2022. The parties have known for months that this hearing was listed for 25 September 2025 and the document bundle had been sent by HMRC to Doshi Accountants twice, in March 2025 and in August 2025. Despite it being their responsibility as the Appellant’s agent to review the document bundle and to raise any issues, they did not do so until the eleventh hour. To say, as Mr Doshi did during the hearing, that with hindsight, he should have been more diligent in preparing for this appeal, is no excuse. These late applications have inevitably had a knock-on effect on the timetable allocated for this appeal; the morning was largely taken up by us having to deal with the applications, with the consequence that we have had to adjourn part-heard.

23. Unfortunately, this also comes against the backdrop of the Appellant and its representatives, Doshi Accountants, having failed to comply with pretty much every deadline set by the Tribunal in its directions. The Tribunal’s directions are not requests. They are directions which the parties must comply with. If a party encounters difficulties with compliance and requires an extension of time, they should apply to the Tribunal in advance of the due date for compliance. Any application made after the due date for compliance must still be made as promptly as possible, and the party must explain why the application could not be made prior to the due date. In this case, the Appellant and its representatives, Doshi Accountants, have shown a completely cavalier attitude to compliance with the Tribunal’s directions. We deprecate this approach. The Issues

24. The issues in this appeal were: (a) Whether the Appellant was entitled to use the second-hand margin scheme and their VAT returns were therefore correct – HMRC assert that the Appellant failed to meet the requirements for the margin scheme and was not eligible, leading to incorrect VAT returns and an understatement of tax, and HMRC were therefore correct to raise VAT assessments based on gross sales. The Appellant contends otherwise, stating that it was entitled to use the scheme as it buys and sells second hand cars. (b) Whether HMRC should suspend the penalties for careless behaviour (it being accepted by the Appellant that penalties for careless behaviour are appropriate).

25. As we indicated above, the hearing had to be adjourned part-heard due to the Appellant’s late applications. At the conclusion of the part-heard hearing, we directed the parties to file written submissions to address the second issue as to whether HMRC should suspend the penalties for careless behaviour.

26. Correspondence was received by the Tribunal on 22 October 2025, wherein the Tribunal was informed by the parties that they had reached an agreement on the second issue as to the suspension of the penalties. The parties made a joint application to discharge the direction for written submissions on that issue and for the remainder of the appeal to be determined on the basis of arguments and evidence already advanced. I granted that application on 24 October 2025.

27. The sole issue which we are required to determine is whether the Appellant was entitled to use the second-hand margin scheme.

28. There is an initial burden on HMRC to show that the Appellant was not entitled to use the second-hand margin scheme and that its VAT returns were therefore incorrect. The burden then passes to the Appellant to demonstrate that the assessments are wrong.

29. The standard of proof is the ordinary civil standard, this being the balance of probabilities. Background

30. The Appellant was incorporated on 22 May 2013, and is in the business of selling used cars and light vehicles. Its current directors are Sukhwinder Singh Kang (since 22 May 2013) and Ravjot Singh (since 10 June 2013). The Appellant was registered for VAT on 14 April 2015. Its place of business is 69 Mount Road, Penn, Wolverhampton, which is also its registered Office.

31. On 1 June 2022, HMRC wrote to the Appellant to arrange to visit its place of business to check its VAT returns and records.

32. On 17 August 2022, HMRC (Officer Nathan Grandison) visited the Appellant’s place of business and met with one of the directors, Mr Ravjot Singh. The visit had initially been booked for 23 June 2022, but was rescheduled at the Appellant’s request to 14 July 2022 and then to 17 August 2022.

33. During this visit, sales listings and second-hand margin scheme calculations were made available for inspection. According to Officer Grandison’s witness statement dated 26 February 2025: (a) The margin scheme calculations had been completed on all sales within a quarter rather than on each individual vehicle. (b) Mr Ravjot Singh stated that no stock book was maintained. Margins were calculated from purchase invoices and sales proceeds; (c) The purchase invoices were not retained by the Appellant. During the visit, purchase prices were obtained through logging into the Appellant’s online account with its supplier. (d) Further vehicles were sold on commission for friends and family, for which there were no purchase invoices; bank payment information only was available to support the sales invoice. Commission charged varied from vehicle to vehicle. (e) Mr Singh explained that purchases and sales were recorded as follows: Vehicles were generally purchased from BCA Marketplace. Once invoices were received, they were paid via bank transfer. Mr Sukhwinder Singh Kang would travel to London at the end of VAT periods to hand the invoices and bank statements to the company accountant for inclusion in the next VAT return. (f) Vehicles were sold to the general public. Sales invoices were completed once a vehicle is sold. Nearly all payments were received via bank transfer. Sales invoices and bank statements would be sent to the company accountant to be included in the next VAT return. (g) The Officer provided guidance to the Appellant on record keeping requirements for the margin scheme for second hand vehicles, especially the requirement to maintain a stock book. Due to Mr Ravjot Singh’s apparent lack of understanding of the record keeping requirements, and limited records available, the Officer ended the visit and advised he would request further records to support the Appellant’s VAT returns to establish whether the margins calculated were correct.

34. On 18 August 2022, HMRC sent a letter to the Appellant requesting further information including VAT accounts, the stock book for margin scheme sales and current stock, bank statements, and selected purchase and sales invoices.

35. On 8 September 2022, the Appellant replied by e-mail and included a list of current stock and purchase invoices, but did not provide a stock book. As for sales invoices, lists of payments received were provided instead.

36. On or about 29 November 2022, the documentation was reviewed by Officer Grandison, who noted that whilst he had not identified issues with the purchase invoices, he was unable to confirm the credibility of the Appellant’s VAT returns as the records provided had not been completed on an individual car basis and he was therefore unable to establish the margins achieved. He also noted that deductions had been made which could not be claimed, and that the stock book had still not been provided (only a list of current stock having been provided).

37. On 30 November 2022, HMRC wrote to the Appellant explaining that it was not eligible to use the margin scheme as it had not kept the required records, including a margin scheme stock book, and that there were issues with the sales invoices which did not contain the unique stock book numbers or the phrase “margin scheme – second hand goods” as required. The letter also explained that the margin calculations appeared to include deductions which could not be claimed under the margin scheme, and that HMRC had been unable to establish how various figures had been calculated.

38. HMRC included a schedule of proposed assessments, based on the Appellant not being eligible to use the margin scheme.

39. HMRC also requested further information from the Appellant, including a stock book detailing the purchases and sales of vehicles in the Appellant’s margin scheme calculations for VAT periods 11/19, 11/21 and 05/22.

40. On 23 December 2022, the Appellant’s newly appointed representative, Doshi Accountants, emailed HMRC to state that it had been appointed. On 4 January 2023, HMRC sent copies of its previous correspondence with the Appellant to its new representative, Doshi Accountants. A pre-assessment letter, requesting a response by 25 January 2023, was also sent.

41. On 15 January 2023, Doshi Accountants e-mailed HMRC asking for additional time to respond, until the week commencing 6 February 2023. On 17 January 2023, HMRC replied and stated that it would agree to extend the deadline until 10 February 2023, and that the absence of a response would be taken as agreement to HMRC’s proposed assessments.

42. The deadline of 10 February 2023 passed with no response.

43. On 14 February 2023, HMRC e-mailed Doshi Accountants to say that as the extended deadline had passed without a response, assessments would be made. A notice of assessment, information on penalties and a request to identify at least one “SMART” condition which would help the Appellant avoid making further similar inaccuracies were attached.

44. This email triggered a response from Doshi Accountants, who replied on the same day asking for a further extension until 24 February 2023.

45. On 24 February 2023, Doshi Accountants e-mailed HMRC, stating that the VAT due should be calculated on the profit margin as the Appellant was a second-hand cars sales business. No information or further evidence was provided to address the points which had been raised by HMRC in respect of the Appellant’s eligibility or otherwise to utilise the scheme.

46. HMRC replied that in the absence of supporting evidence, the assessments would be enforced.

47. On 28 March 2023, HMRC e-mailed the Appellant and Doshi Accountants noting that no additional information had been received following the notice of assessments, and that no “SMART” condition had been proposed by the Appellant. HMRC provided details of the penalty proposed for careless inaccuracies. The Appellant was requested to submit any further information which it wanted HMRC to take into account by 27 April 2023.

48. The deadline of 27 April 2023 also passed without a response.

49. On 11 May 2023, in the absence of any response from the Appellant, HMRC issued a notice of penalty assessment to the Appellant and Doshi Accountants.

50. Doshi Accountants responded on the same day, stating that they were “surprised to receive this email.” They requested a review of the VAT assessment and penalty.

51. On 16 June 2023, HMRC issued their review conclusion letters (a) upholding the VAT assessments; but (b) varying the penalty amount, with a reduction given for quality of disclosure, which reduced the penalty from £22,866.42 to £20,341.03.

52. On 21 July 2023, Doshi Accountants notified the appeals to the Tribunal. The Legal Framework

53. We have set out here a summary of the legal framework which applies to the sole issue that we must now determine.

54. Section 24 of the Value Added Tax Act 1994 (“VATA 94”) defines input tax and output tax. Section 25 requires a taxable person to account and pay for output tax, and entitles them to claim for input tax, in their VAT return for the relevant accounting period.

55. Section 50A provides for margin schemes, and enables the Treasury to specify supplies that may be accounted for based on profit margins.

56. Section 73(1) allows for a VAT assessment to be made to the best of an HMRC officer’s judgment, where a person’s VAT return is incorrect or incomplete.

57. Section 83 specifies decisions that may be appealed to the Tribunal, including VAT appeals.

58. Paragraph 6 of Schedule 11 of VATA 94 provides that a taxable person is to retain their VAT records for a period of 6 years.

59. Article 8 of the Value Added Tax (Cars) Order 1992 (SI 1992/3122) (“VAT (Cars) Order 1992”), provides that a person may account for VAT on supplies of second-hand cars by reference to the profit margin, subject to various conditions as directed by HMRC.

60. Regulation 31 of the Value Added Tax Regulations 1995 (“VAT Regulations 1995”) specify the records a taxable person is required to keep.

61. The conditions for operating the second-hand motor cars margin scheme are set out in VAT Notice 718/1, and from 23rd December 2021, on the Respondents’ website: https://www.gov.uk/guidance/using-the-vat-margin-scheme-for-second-hand-vehicles . Parts of these have force of law.

62. The following are key extracts from VAT Notice 718/1: “1.4 Force of law The VAT (Cars) Order 1992 requires businesses who sell vehicles under the Margin Scheme to keep the records and accounts detailed in sections 4 and 5 of this notice. All of sections 4 and 5 have legal force and supplement the law. 2.2 What are the conditions for using the Scheme? You don’t have to use the Margin Scheme: it’s optional. If you decide to use it, there are a number of conditions you will have to meet. If you can’t meet all the conditions, you can’t use the scheme… you must meet the record keeping rules of the scheme. There are special rules about invoicing and stock records (see sections 4 and 5).

5. Records and accounts The rules in this section have the force of law. 5.1 What records must I keep? VAT Notice 700/21: keeping VAT records gives guidance on the general records you must keep if you are registered for VAT. If you use the Margin Scheme, there are some additional record keeping rules which apply to your stock book and invoices – paragraphs 5.2 to 5.3 give details. These additional rules exist so that HM Revenue and Customs (HMRC) officers can use your records to check the margin you have achieved on each vehicle you have sold. It’s important that you keep to these rules so that you can continue using the Margin Scheme. If HMRC can’t check the margins you have declared from your records, VAT will be due on the full selling price of the vehicles you’ve supplied, even if they were otherwise eligible for the scheme. If you are not sure whether your records meet the Margin Scheme rules, please call the VAT general enquiries helpline. 5.2 What are the rules for stock books? You must keep your stock book up to date and it must include all of the information in the table below. This applies to each vehicle you purchase for resale under the Margin Scheme. You may, if you wish, include further information for your own accounting purposes. You must include your Margin Scheme calculations under the appropriate headings in your stock book. If your purchase price is higher than, or the same as, your selling price, then no VAT will be due. In these circumstances you should show the VAT due as ‘Nil’ in your stock book. You must not offset any VAT on vehicles which are sold at a loss against VAT on vehicles which you have sold at a profit. An example of a Margin Scheme stock book is included at section 6. 5.3 What are the rules for Margin Scheme invoices? The information in the table below must always appear on the invoices you receive, or issue. Remember: if you are buying from a private individual or an unregistered business, you must make out the purchase invoice yourself. 5.5 How long must I keep records? Generally, you must keep all your business records for VAT purposes for at least six years. If the six-year rule causes you serious storage problems or undue expense, please call the VAT general enquiries helpline. You may be allowed to keep some records for a shorter period.”

63. The following are key extracts from HMRC’s website: “ Records you need to keep You must keep normal VAT records when you use the margin scheme. You must also keep: • a stock book that tracks each item sold under the margin scheme individually • copies of purchase and sales invoices for all items You must include any goods you buy or sell using a margin scheme on your VAT return. Records you must keep for goods on sale or return If your stock includes vehicles supplied to you on a sale or return basis, you must also include the following details in your stockbook: • the date of transfer of the vehicle • the address of the dealer or person transferring the vehicle • the date of sale or return If any vehicles are removed from your stock on a sale or return basis to another dealer’s premises, you should note your stock record with the date and details of the dealer to whom you have transferred the vehicles. If you sell a vehicle on behalf of a third party, and you issue an invoice for that vehicle in your own name, you are acting as an agent for VAT purposes and you must account for any output tax on the sale. Stockbook You must record certain information for each item you buy and sell that you want to use a margin scheme for. Purchase s Sale s Sto ck numbe r i n numerica l s equen ce - Dat e o f pur c ha se Dat e o f s al e Pur c has e in v oi ce numbe r (unle ss yo u mad e ou t th e pur c ha se in v oic e your s elf ) Sale s invoi ce numbe r Pur c has e pri ce Sellin g pri c e , o r metho d o f di s posa l Nam e o f selle r Nam e o f bu y e r De sc riptio n o f th e ite m - Margi n o n s al e ( s ale s pric e le ss pur c has e pri c e ) - VA T du e (16.67 % o r one- s i x th ) You must keep VAT records for 6 years. You have to keep records until you sell the item for any stock you bought more than 6 years ago that you plan to sell under the margin scheme. Invoices To use the margin scheme, you must have invoices for each item that meet the VAT margin scheme requirements. The margin scheme invoice requirements are not the same as the general VAT invoice requirements. You must have: • an invoice from the seller when you bought the item • a copy of the invoice you gave to the buyer when you sold the item Buying When you buy something you plan to sell under a margin scheme, you must get an invoice from the seller that includes: • date • seller’s name and address • our name and address, or that of your business • the item’s unique stockbook number (if you bought the item from another VAT-registered business) • invoice number (unless you made out the purchase invoice yourself) • item description • total price - you must not add any other costs to this price • if you bought the item from another VAT-registered business, any of the following: ‘margin scheme - second hand goods’, ‘margin scheme - works of art’ or ‘margin scheme - collectors’ items and antiques’ Selling When you sell something you plan to claim for under a VAT margin scheme, you must give the buyer an invoice that includes: • date • your name, address and VAT registration number • the buyer’s name and address, or that of their business • the item’s unique stock book number • invoice number • item description • total price - you must not show VAT separately • any of the following: ‘margin scheme - second hand goods’, ‘margin scheme works of art’ or ‘margin scheme - collectors’ items and antiques’…”

64. There is also a body of caselaw. In Ancient & Modern Jewellers Ltd and Anor. v HMRC the Tribunal pointed out, at §14: [2024] UKFTT 774 (TC) , “Use of the margin scheme is optional and subject to strict and precise compliance obligations. Where those obligations are not met VAT is required to be accounted for on the full selling price.. .”

65. In Roscoe Noonan v HMRC [2025] UKFTT 67 , the Tribunal said this: “109. It is clear from the evidence that HMRC repeatedly explained to Mr Noonan and to his agents that traders can only use the margin scheme for second-hand cars if they comply with strict record-keeping requirements, which included keeping a stock book which records certain information set out in VAT Notice 718/1.

110. If a car dealer is not entitled to use the margin scheme for second-hand cars, they must account for VAT under the normal rules for businesses that buy and sell goods. This includes, broadly speaking, accounting for the correct amount of VAT on all their sales (output tax), with credit being given for VAT paid by the trader on business-related purchases (input tax).

111. Therefore a critical question in this appeal is whether Mr Noonan kept a stock book in the period to which the VAT assessment relates …

113. … Mr Noonan did not keep a stock book in the period 1 April 2008 to 31 July 2018. This means that he was not entitled to use the margin scheme for second hand cars and must account for VAT on the total value of his sales …” Discussion and findings

66. We have considered all the documents in the hearing bundle, including the Appellant’s notice of appeal, its letters and documentation sent to HMRC, the witness statement of Officer Grandison, and the additional documents which we have permitted the Appellant to adduce.

67. Officer Grandison gave oral evidence and was cross-examined. Both parties made fulsome submissions.

68. The parties should be assured that we have considered all their relevant points, and if we do not deal specifically with a particular point, that does not mean that they were not considered in the round when we reached our decision. We have reflected carefully upon all the evidence and the parties’ submissions. Whether the Appellant was entitled to use the second-hand margin scheme

69. HMRC submit that the Appellant failed to meet the eligibility requirements and was therefore not entitled to utilise the second-hand car margin scheme.

70. The eligibility requirements were set out in VAT Notice 718/1, and from 23 December 2021, have been set out on HMRC’s website. We have set out the relevant extracts above. The sections on record-keeping requirements have the force of law. The requirements certainly go beyond a taxpayer simply buying and selling second hand cars.

71. It is clear that one of the legal requirements is the need to keep a stock book, which must contain certain prescribed information. It is a fact that the Appellant did not keep a stock book which contained the prescribed information. This was confirmed during Officer Grandison’s visit on 17 August 2022, when he spoke to Mr Ravjot Singh, who stated that the Appellant did not maintain a stock book.

72. We agree with HMRC that the belated attempts made by the Appellant to reconstruct its sales and purchase records following HMRC’s visit in August 2022 do not constitute a stock book, and do not retrospectively validate the Appellant’s use of the margin scheme. Contrary to Doshi Accountants’ submissions, the legislative framework does stipulate the contents of the stock book (as we have outlined above). It is not up to the individual trader to pick and choose what they wish to include in the stock book.

73. The other requirements stipulate the contents of margin scheme invoices, and that invoices must be held for all items bought or sold under the margin scheme for a certain period of time. We have considered the sales invoices provided in the hearing bundle. It is apparent that there are deficiencies in respect of the sales invoices, as follows: (a) There are no references to the margin scheme in those invoices; (b) There are no references to the item’s unique stock book numbers (this is not surprising given that the Appellant did not maintain a stock book); (c) There are no invoice numbers; and (d) In some instances, there are scant details provided for the buyer, with only a name and no address.

74. The sales invoices therefore do not comply with the legal requirements which must be met by a trader who wishes to utilise the second-hand margin scheme.

75. The fact that HMRC has, as a matter of internal policy, provided the Appellant with the opportunity to rectify its records, or to reconstruct a stock book, does not detract from the fact that there are legal requirements, as set out in VAT Notice 718/1 and on HMRC’s website (from 23 December 2023), which must be met by a trader who wishes to utilise the second-hand car margin scheme. In this case, those requirements have not been met.

76. Further, it is clear to us that despite HMRC having provided the Appellant with ample time to provide further information which would have enabled HMRC to verify the margin scheme calculations, the Appellant did not do so.

77. We find that the Appellant failed to meet the legal requirements of the second-hand margin scheme and was therefore not entitled to utilise the scheme. The VAT Assessments

78. The Appellant’s VAT returns for the periods under appeal were not accurate, as they were not entitled to use the margin scheme (per our finding above).

79. We have considered HMRC’s assessments. They were undertaken by Officer Grandison, who has explained in his witness statement how he arrived at his calculations and the material on which his calculations were based. In summary, the Officer : (a) applied the VAT fraction (1/6th) to gross sales in order to find the amount of VAT that should have been declared on those sales in each period, and (b) assessed for the difference between this and the VAT declared in the relevant return.

80. HMRC were correct to make assessments based on the full selling price of the vehicles. No cogent information has been provided by the Appellant to satisfy the Tribunal that the assessments have not been made to HMRC’s best judgment. We accept Officer Grandison’s evidence and his assessments, which we accept have been raised to the best of his judgment and were validly issued on a timely basis. Conclusion

81. For the reasons set out above, the appeal is dismissed. Right to apply for permission to appeal

82. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 15 th JANUARY 2026