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Tax Case -- Criminal decision

11 July 2001
Issue: 3815 / Categories:

In three appeals before the VAT tribunals, a preliminary issue arose concerning the applicability of the European Convention on Human Rights to VAT and excise procedures. This was whether or not the imposition of civil penalties for alleged dishonest evasion of tax under section 60(1), VAT Act 1994 and section 8(1), Finance Act 1994 gave rise to criminal charges within the meaning of Article 6(1) of the convention, and thus entitled them to the fair trial provisions of Article 6.

In three appeals before the VAT tribunals, a preliminary issue arose concerning the applicability of the European Convention on Human Rights to VAT and excise procedures. This was whether or not the imposition of civil penalties for alleged dishonest evasion of tax under section 60(1), VAT Act 1994 and section 8(1), Finance Act 1994 gave rise to criminal charges within the meaning of Article 6(1) of the convention, and thus entitled them to the fair trial provisions of Article 6.

The tribunal found for the taxpayers, so Customs appealed. The Court of Appeal said that the tribunal was correct in its decision. Three criteria had to apply to determine whether a criminal charge had been imposed within the meaning of Article 6:

* the classification of the proceedings in domestic law;

* the nature of the offence;

* the nature and degree of severity of the penalty which the person concerned risked incurring.

With regard to the first point, the classification of the penalties in section 60(1) as civil, could not be regarded as more than the starting point, where the enforcement of the penalty was designed to punish and deter members of the public. Secondly, the nature of the offence suspected and sanctioned by the application of civil penalties was fraud or dishonesty in respect of tax payable, and it was left to Customs to decide whether to apply a civil penalty or to prosecute. The contrasts between the two types of cases was procedural rather than going to the nature of the offence, which was not permitted by the convention.

The convention did not require the potential penalty to involve imprisonment; it was sufficient that the penalty be a deterrent and substantial.

The appeal was dismissed.

(Commissioners of Customs and Excise v Han and another and other appeals, Court of Appeal, 3 July 2001.)

Issue: 3815 / Categories:
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