Mr Hugh Newell and Mrs Icilda Newell t/a Tanya’s Takeaway v HMRC

In Mr Hugh Newell and Mrs Icilda Newell t/a Tanya’s Takeaway v HMRC (TC03120 – 13 December 2013) HMRC had enquired into a partnership return and issued a closure notice dramatically increasing profits. Relying on the presumption of continuity HMRC had also increased the profits for the following four years by the same percentage.

The tribunal reviewed the calculation of the profits made by the partnership a small take-away business and concluded that the profit increase suggested by HMRC was not substantiated. It assumed an increased volume of sales which would not have been sustainable given the size of the premises and the number of staff. It also assumed a gross profit ratio far superior to the average achieved by similar businesses in the area – which would have made the cash injections by the partners unnecessary.

HMRC had criticized...