Statistically Invalid Estimate Still Enforceable, Rules Tribunal

When it comes to contesting tax assessments, the playing field is far from level, as a recent VAT case shows.

HM Revenue and Customs (HMRC) made assessments on a trader based on discrepancies between recorded sales and cash in the tills on two visits. The assessments were made to cover a six-year period.

In appealing against the assessments, the trader obtained an expert report from a statistician, who gave evidence that to extrapolate from such a small amount of data in the way HMRC had done was statistically invalid.

The First-Tier Tribunal rejected the trader’s claim and an appeal was made to the Upper Tribunal on the ground that the First-Tier Tribunal had ignored the expert evidence. The Upper Tribunal rejected that assertion and dismissed the appeal. The Tribunal was entitled to prefer HMRC’s evidence, which was that their estimate was based on the evidence available to them, despite the fact that this was not statistically valid.