Taxman presses on with ‘unlawful’ raids investigation

The taxman is planning to press on with an investigation involving a gilt strips tax scheme and Mercury Tax Group, despite a judicial review ruling that it had overstepped its powers in raiding the firm’s offices.

The Royal Courts of Justice backed Mercury Tax Group’s claim that HM Revenue & Customs unlawfully obtained warrants to conduct raids on the firm’s premises and the home of CEO, Neil Masters.

An HMRC spokesman said the judgment also rebuffed Mercury’s claims that the scheme had been ‘properly implemented’.

‘In light of this and further evidence that could not be used in the Judicial Review, HMRC intends to continue with the investigation,’ he said.

Andy Wells, head of forensics and investigations at Mercury Tax Group, said the Group feels vindicated by the decision, but said he is surprised HMRC are planning further the action. ‘We wouldn’t expect them to be pursuing it. At this stage we need them to adopt a sensible approach and if they’re not going to then we have to deal with that,’ he said.

In addition, he said the department’s indication that further evidence is yet to be utilized is unfounded. ‘That’s nonsense, quite frankly,’ he said.

The investigation is understood to centre on the structuring of a gilt strips scheme.

In November 2007, the firm accused HMRC of adopting ‘sledgehammer’ tactics, when it had fully co-operated with the department’s requests.

‘We don’t think there was ever just cause for seeking a warrant and the judge agrees with us in those circumstances. All we can do is follow the judicial review procedure, and if you’re not prepared to stand up and do that then be prepared to suffer the consequences,’ said Wells.

The validity of the warrants was called into question after a number of documents and computers were seized.

Wells said he expected damages to the firm’s brand to be factored into compensation costs.

In delivering the decision, the judge said that if all the necessary facts had been presented by HMRC, warrants to raid both premises would not have been authorised.