A CLOTHES trader who ran a short-lived store in Burnley has been told he must pay the taxman nearly £700,000.

Tariq Mahmood claimed he had been selling children's clothing from TM Stores – which should be zero-rated for VAT.

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But investigators from HM Revenue and Customs conducting an audit uncovered an declared bank account belonging to Tariq Mahmood, who traded as Port Street Fashions, containing £586,448.

Mahmood ran the outlet in Burnley, TM Stores, from December 2005 to May 2006, which he suggested, along with a wholesale firm in Manchester, had generated £1.13million, a tax tribunal heard.

He claimed he had been sellling clothing exclusively for 14 and 15 year olds, in the Burnley store, and would not be liable for VAT.

But tax tribunal judge David Porter has dismissed an appeal by the businessman, now based in Hyde, Cheshire, and ordered him to pay £406,989 in back tax and a penalty clause of £284,892.

Customs investigator Jayne Charnock said it was ‘surprising’, if the Burnley shop had taken £1million in the short time it was open, Mahmood did not keep it going longer.

Lawyers representing Mahmood, who later had shops in Bury, Nottingham and Scarborough, said the landlord had initially let the Burnley shop on a rent-free basis for the first two months but the tax inquiry team was not satisified with the explanation.

Mahmood told a tax tribunal that he had bought Italian-made clothes in Paris from a number of suppliers, and produced certificates, signed by French traders, to support his contention that they were for teenagers.

But Judge Porter said it was ‘not surprising, if they wished to keep his custom, that they would sign...certificates prepared for Mr Mahmood’.

Mahmood said that he had spent a lot of his time 'on the road', buying and sourcing stock, and blamed any failings which had been identified on his book-keepers.

The shop in Burnley had been closed because the landlord had wanted him to sign a 15-year lease and he was reluctant to agree.

Rejecting his appeal, Judge Porter said: “The only clothing produced to the tribunal were quite large and in our judgment would have fitted a person of 14 years or more.

“Given the confusion about the size of the clothes, we have no evidence as to who was to wear them.”

Earlier the tribunal heard that the £586,448 may have been transferred from Mahmood’s other accounts and some of his purchases invoices had been dumped in skips and were irretrievable.