It's a long time since I have run a chess tournament. When I did, I tried, usually successfully, to sweet-talk head teachers into charging me nothing, or next to nothing, for school premises. Quite often, I used the halls of schools I taught in, so there was a clear direct benefit to the pupils of that school. Typically I charged £6 to enter, but guaranteed a first prize of 10* entry fee in each section. I would run under-8, 10, 12 & 18 sections. I also used to work on sponsorship, with some success. Having said that, the Essex Junior Chess Association's accounts never paid me or my family more than a good curry for our efforts on the day of the tournament.
If Basman owes that much dosh, then my suspicion about him overcharging on entry fees is correct. In the 2016 tournament he charged £15 to enter the "Megafinal" but offered no cash prizes. Hundreds of children participate in each. The Essex one has for many years been at a school in which the Basman's RH Essex Man has been on the governing body. I suspect he negotiated a very favourable daily rate. When I have acted as an arbiter (which I haven't for about 10 years) in the Essex "Megafinal" I think I might have been paid my travelling expenses.
Am I right in thinking that for VAT HMRC only go back 6 years, as they do for income tax? I should know this as I used to work for them! If that is the case, and VAT is at 20%, then Basman owes £50k a year for 6 years. His profit must have been £250k a year in that case. If my maths/knowledge of how VAT works is lacking (I was a lowly programmer/analyst), perhaps someone can correct me.
I think Citoyen is right. Chess tournaments should be treated as any other sporting event is for tax purposes. But Basman is an idiot. He must have known that there was a chance that the taxman would come knocking and he should have put the money away in case. It's a classic case of killing the goose that lays the golden egg.
Having said all that, top chess players as a breed tend to be very good at accumulating money. Possibly there is none better at doing that than this guy
https://www.theguardian.com/technology/2016/feb/16/demis-hassabis-artificial-intelligence-deepmind-alphago.
It would not surprise me for one moment if someone were to come along and bail Basman out so that the tournament can continue in the future. He says he hasn't got the money himself.