Last December, the VAT & Duties Tribunal ruled in the Han & Yau case that tax evasion offences should be considered criminal for human rights purposes because of the severity of the penalties imposed.
Customs appealed against the decision, but has had its case thrown out by the Court of Appeal.
Michael Bailey, an indirect tax partner at PricewaterhouseCoopers, said: ‘The outcome of this case will lead to a fundamental change in English law.’
According to Bailey the ruling meant that the Customs’ practice of treating tax evasion as a civil offence was in breach of the Human Rights Act.
PwC, who represented the defendants, said anyone charged with tax evasion should have the same protections, such as legal representation, as if they were being tried in a criminal case.
Bailey said: ‘The hallmark of a civilised society is that it provides access to justice for all, and ensures that the due process is fair.’
PwC was represented by its own barrister, Andrew Young in the case – the first barrister from an accountancy firm to appear in a Court of Appeal.
PKF’s John Gwyer called on Customs and the Inland Revenue to get together with the tax profession to find an alternative way forward.
‘If this decision means the civil approach is not going to be viable in the future because the authorities have to go the criminal route, then that’s a retrograde step,’ he said.
But Customs said it was confident the judgement would not impact on the procedures in place for investigating evasion cases.
A spokesperson said: ‘We are disappointed with the result, but think the civil penalty regime is compatible with the Human Rights Act.’
Philip Smith writes:
Customs & Excise carrys out tax investigations under civil law, which allows the defendant to negotiate, admit liability, incur a penalty fine but escape without a criminal record.
The VAT Tribunal, however, ruled that as the fines imposed could be penal in nature, the proceedings should be considered to be criminal in terms of human rights, allowing the defendant the right to silence, legal representation and an interpreter.
Importantly, putting the investigation on the same level as criminal status allows the defendant to avoid self-incrimination.
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