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This is an interesting and important case, which highlights the importance of proper record-keeping.

The taxpayer company submitted a corporation tax return which showed a profit of £20,000, which the company admitted to be an estimate.  Some months later the company submitted an amended return, claiming that it made a loss of £70,000.  The reason given in a covering letter for the submission of the original estimated figures was that during the financial year, the company suffered data loss and had to reconstruct the actual figures, although the explanations given surrounding the data loss were somewhat incogent.

HMRC opened an investigation and found that the company’s records were insufficient to support the claimed loss of £70,000. HMRC amended the self-assessment to show once again a profit of £20,000.
 
HELD: The Special Commissioners dismissed the appeal. The company was unable to substantiate its claim to have made a loss and, likewise, were insufficient to displace HMRC’s assessment of £20,000.  In the absence of any better information HMRC was entitled to amend the self-assessment to show a profit of £20,000 as estimated by the company.

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