Big Brother looms over settlements

‘This doesn’t sound very democratic,’ said Conservative MP Nick Gibb.ntrol and unconstitutionally’ by hiding co-operation convention. Jonah Bloom reports. ‘This is going to hurt UK plc,’ said John Gwyer, tax investigations director at Levy Gee. ‘This is going to cost the taxpayer in legal fees and prison costs,’ said John Whiting, head of personal tax at Price Waterhouse.

They were all talking about the same document: an Attorney General’s convention to ensure co-ordination and liaison between prosecuting authorities.

The authorities in question were the Inland Revenue, Customs & Excise, the Department of Trade and Industry, the Serious Fraud Office, the Health and Safety Executive, the DSS, the Environment Agency, the Ministry of Agriculture, Fisheries and Food, the Intervention Board, and the Bank of England.

Strangely, although the convention was signed on 11 February, it only came to light last week, when Accountancy Age unearthed it during an investigation into the contentious Regina v W case.

The Attorney General’s office had prepared a press release when the convention was framed, but no-one seems to have received the release. The convention was placed in the House of Commons library.

Bill Docherty, national head of tax investigations at Arthur Andersen, said he has had a copy for some time, but the bulk of tax specialists who spoke to Accountancy Age were unaware of the convention until last week.

Gibb said: ‘We were upset this week about the announcement of clause 30 in the Finance Bill. Someone went to look in the House library, and the statutory instruments for the clause hadn’t been filed. We brought this up as a point of order. The business with this convention sounds similar – if no-one was told, that just isn’t democratic.’

Levy Gee’s Gwyer went further. ‘This is evil. It is unconstitutional and an abuse of process. The news release which went with the convention is disingenuous: it talks about industrial accidents – but if the purpose was to improve health and safety prosecutions, why did the Revenue and Customs need to be involved?’ he said.

‘We’ve already had a lot of cases of bad, heavy-handed investigations in the UK, such as the Kingston Smith and Farthings restaurants cases; this will only make things worse. It is very “big brother”, a case of government departments acting out of control.

‘The government will say this is designed to deal with the evil-mongers, the big players who are depriving the country of large amounts of tax revenue. I can understand they want to get to those companies, but in the profession we know that small and medium-sized companies will get caught in the cross-fire. I want a parliamentary debate about this.’

In the US, the prosecuting authorities have a pact to share information and to work together, and the UK seems to be adopting a similar system. But only last year there was a Congressional debate on the Internal Revenue Service in which its power was questioned because of the number of complaints from victims of IRS investigations. Do we want to go down this route?

PW’s Whiting feels such a system would be in no-one’s interest. ‘The pragmatic idea behind agreements with the Revenue was maximising tax collection.

It suits everyone to have agreements. Many people will make a clean breast of their tax affairs if they can reach a settlement. It saves the Revenue a lot of hassle and the Crown the cost of many years’ board and lodging,’ he said.

Of course, under the 1986 Criminal Justice Act, the SFO could serve a notice on the Revenue or Customs requiring them to reveal information on any company. Some feel the February convention changes nothing, because its thrust is towards co-ordination of prosecutions, not the sharing of information prior to prosecutions. Andersen’s Docherty said: ‘Neither the Regina v W case nor the convention alters the relationship between the Revenue and criminal proceedings.’

Differences in training

But most tax experts disagreed, saying this cosy little agreement could change tax investigations as we know them and cost taxpayers billions of pounds in the short term.

Mark Perlstrom, head of tax investigations at Lee & Allen, said it could even be a way of Customs attacking Revenue work ‘through the back door’, so that we may end up with two very different authorities: the merged Revenue and Contributions Agency looking into day-to-day compliance, while Customs is responsible for all the company investigations.

‘The Revenue hasn’t got the training to make a success of spend-to-save.

It is 20 years behind Customs on investigations,’ he said. ‘This could be its way round the problem.’

Looks more like problem creation. Expect this one to run.

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