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 Inland Revenue Investigations

The Inland Revenue are using business economics models to justify additions to business profits. These models can be defended, especially where there is little other evidence to suggest fraud.

A business  model does not fit all sizes or all businesses in a trade sector.  When faced with Inland Revenue arguments based upon theoretical calculations, it is imperative to check the assumptions upon which they are based.

In an investigation case, the Inspector calculated profit uplifts of more than £100,000 per annum for a restaurant and take-away business, based upon foil containers purchased. Even if open 24 hours per day, 365 days per year, the business could not generate that level of income. A tour of the premises, showing the Inspector the storeroom, still full of foil containers, was evidence enough to refute the figures.

Where the assumptions made are realistic Case law is available to support claims that business economic models alone are not sufficient to justify amendments to profits. They need to be supported by evidence that, for instance:

· the business records are clearly inadequate and /or incomplete, and

· there are unaccounted for private banking or increases in wealth.