The court affirmed in a majority decision (albeit with great reluctance) the principle that substantial tax penalties can amount to criminal charges for human rights purposes. The principle had been established in a line of cases heard by the European Court of Human Rights, and has also now been affirmed in a number of cases before the lower courts in the UK.
What a number of practitioners had been hoping for was that the Court of Appeal might take the opportunity to go beyond the principle and expand on some of the practical consequences that would follow from penalties being criminal charges.
The court in fact had little scope to go beyond the question of whether the penalties in this case should be regarded as criminal. The appeal was ‘in principle’, no facts having been found by the VAT tribunal. However, the court did give some comfort to Customs. For example, it made reference to the ‘general’ right to silence, only to suggest that this right may well not prevent a taxpayer from being penalised for non-cooperation.
Resolving the practical issues could be difficult. The demarcation between what is a matter governed by the convention and what remains within the scope of domestic law is complex.
Advisers will have to work through the practical consequences of the decision. Is material volunteered as part of a tax enquiry potentially inadmissible in subsequent penalty proceedings? The Court of Appeal appears to suggest not. Will tax authorities have to comply with PACE procedures?
The answer to this would also appear to be no. However, there will be situations where article six protection may have a significant effect and advisers will need to give advice that has regard to convention/ HRA rights.
The decision has brought some clarity in the sense that the court was at pains to stress that, fundamentally, it did not consider that its decision should radically affect current investigation practices. However, the practical consequences of article six protection are likely to be elusive and the principles will continue to be developed on a case by case basis. It is perhaps fair to say that this is not a great deal of help to practitioners advising in the heat of battle.
- Tom Murray is UK head of tax investigations, KPMG
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