Judgment summary
This is a decision on an application for permission to appeal to the Upper Tribunal (Tax and Chancery Chamber) from a decision of the First-tier Tribunal (Tax Chamber) released on 29 January 2026, which dismissed three appeals brought by Massala Exotic Limited and its director, Khosru Miah, against HMRC.
The FTT had upheld a VAT best judgment assessment of £280,903 for periods 09/13 to 09/19, a company penalty of £176,966.37 (63% of the VAT assessed) for deliberate behaviour, and a personal liability notice (PLN) making Mr Miah personally liable for that penalty.
Judge Rupert Jones, having earlier refused permission on the papers on 27 July 2026, held an oral renewal hearing on 15 September 2026. He refused applications to admit fresh evidence not before the FTT, and refused permission to appeal on all three grounds pursued, finding no arguable error of law in the FTT's Decision.
Background
The first Applicant, Massala Exotic Limited, ran an Indian restaurant between 2008 and January 2020, and the second Applicant, Khosru Miah, was its director throughout that time [3]. HMRC considered that the company had underdeclared its takings for VAT periods 09/13 to 09/19 and issued a best judgment assessment of £280,903 [3(1)].
HMRC also imposed a company penalty of 63% of the VAT assessed, based on deliberate behaviour, and sought to recover that penalty from Mr Miah personally via a PLN [3(2)].
HMRC's position was that the company owned and used a single card machine, with merchant acquirer data justifying the assessment [3(4)]. The Applicants' position was that there were three card machines, only one used by the company, with the other two lent to associated companies run by family relations of Mr Miah, the takings from which were paid via a Lloyds account and later transferred to the associated companies, who paid VAT on those amounts [3(5)].
The FTT rejected the Applicants' account, finding as a fact that only a single card machine was used by the company and that the Lloyds account payments were not payments for meals supplied by the associated companies [49]-[51]. It upheld the VAT assessment [53], the company penalty [57]-[62], and the PLN [63]-[66].
The FTT refused permission to appeal (the PTA Decision, dated 30 April 2026). Mr Miah renewed the application to the UT, which was refused on the papers on 27 July 2026 on four grounds. Mr Miah renewed the application for an oral hearing, relying on three grounds, heard by video on 15 September 2026, with Mr Shahabuddin (his accountant and FTT representative) and Mr Hussein appearing for him, and Mr Miah also attending and making submissions.
Core dispute
The renewed application raised three grounds of appeal to the Upper Tribunal. First, whether the FTT properly applied the best judgment test to HMRC's VAT assessments for periods after June 2016, where HMRC had no merchant acquirer data and instead repeated the same expected gross sales figure of £240,780.56 (producing an assessment of £11,236.43) for every quarter until September 2019, without accounting for seasonality, changing trading circumstances, declining sales, or the eventual cessation of trading in January 2020.
Second, whether the FTT properly considered the lawfulness and amount of the 100% attribution of the company penalty to Mr Miah under the PLN, given that HMRC's notice of 14 September 2020 had referred to the company's insolvency, which is not a statutory condition under paragraph 19 of Schedule 24 to the Finance Act 2007.
Third, whether the FTT failed to address the alleged duplication of turnover, namely that receipts credited to the Lloyds bank account represented sales of two other businesses (Bayview Services (Cardiff) Limited and Spice Master Trading Limited) which had themselves accounted for VAT on those receipts, and whether the FTT gave adequate reasons for rejecting that submission.
A preliminary issue arose as to whether the Upper Tribunal should admit fresh evidence not before the FTT, namely a witness statement from Mr Miah and a set of HSBC bank statements said to corroborate his account.
Court findings
The Upper Tribunal refused to admit Mr Miah's witness statement as fresh evidence, applying the overriding objective under Rule 2(1) and the power in Rule 15 of the Upper Tribunal Rules, together with the Ladd v Marshall criteria. It found no good explanation for the failure to adduce this evidence before the FTT, particularly given directions warning the Applicants of their evidential deficiencies, and noted that the FTT had already rejected the reliability and credibility of Mr Miah's account [21]-[26].
The Tribunal also refused to admit the HSBC bank statements, since they had never been produced (even to the UT), Mr Miah could with reasonable diligence have obtained duplicates or sought disclosure directions before the FTT, and without sight of the statements it was impossible to assess their relevance or probative value [30]-[41].
On Ground 1, the Tribunal found no arguable error of law in the FTT's conclusion that HMRC's assessment was made to best judgment, applying Van Boeckel v Customs and Excise Commissioners and Customs & Excise Commissioners v Pegasus Birds Ltd. The FTT had given sufficient reasons at [19]-[23] of its Decision, and Mr Miah had provided no evidence to the FTT undermining HMRC's approach [45]-[50].
On Ground 2, the Tribunal held that an appeal against a PLN is a full merits appeal under paragraphs 15-17 and 19-20 of Schedule 24 to the Finance Act 2007, not a review of HMRC's stated justification. No issue had been taken before the FTT on the 100% attribution, and the FTT's reasoning was sufficient to justify full attribution to Mr Miah [55]-[56].
On Ground 3, the Tribunal held that the FTT did not need to resolve the double taxation argument because it had rejected the underlying factual premise, finding that the company had suppressed its true turnover and that the Lloyds account payments were not shown to relate to supplies by the associated companies [39]-[42], [62]-[65]. No Edwards v Bairstow error was disclosed.
Outcome
The Upper Tribunal refused permission to appeal to the Upper Tribunal on all three grounds, finding that none held a realistic prospect of success or raised an arguable error of law in the FTT's Decision [67]. The applications to admit fresh evidence (Mr Miah's witness statement and the HSBC bank statements) were also refused.
Major issues / areas of contention
- Whether the FTT properly applied the best judgment test to VAT assessments for periods after June 2016, where HMRC repeated the same estimated gross sales figure for every quarter without merchant acquirer data.
- Whether the FTT properly considered the lawfulness and amount of the 100% personal liability attributed to Mr Miah under the PLN pursuant to paragraph 19 of Schedule 24 to the Finance Act 2007.
- Whether the FTT failed to address, or gave inadequate reasons for rejecting, the alleged duplication of turnover between the company and two associated companies.
- Whether the Upper Tribunal should admit fresh evidence on appeal, namely Mr Miah's witness statement and HSBC bank statements not previously before the FTT, applying the Ladd v Marshall criteria.