Ali and Another (t/a Shapla Tandoori Restaurant) and Others
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 May 2002 |
| Date | 30 May 2002 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
See headnote and extract from decision at [2001] BVC 2254
VAT Tribunal
The following cases were referred to in the decision:
AP, MP & TPV Switzerland (1998) 26 EHHR 541
Director General of Fair Trading v Proprietary Association of Great Britain ICRWLR[2001] UK HRR 429; [2001] ICR 564; [2001] 1 WLR 700
Begum (Nipa) v London Borough of Tower Hamlets UNKWLR[2002] EWCA Cir. 239; [2002] 2 All ER 668; [2001] 1 WLR 306
Clancy v Caird (No. 1) [2000] HRLR 557
Engel v The Netherlands (1976) 1 EHHR 647
Ferrazzini v Italy UNK[2001] STC 1314
Findlay v United Kingdom HRC(1997) 24 EHRR 221
Garryfallou Aebe v Greece (1999) 28 EHHR 344
Gasus Dosier-und Fordertechnik GmbH v Netherlands (1995) 20 EHHR 403; [1995] ECHR 15375/89
Han & Yau v C & E Commrs VAT[2001] BVC 415
JB v Switzerland UNK(2001) 2 ITLR 663, [2001] ECHR 31827/96
John Dee Ltd v C & E Commrs VAT[1995] BVC 415
National & Provincial Building Society v United KingdomTAX[1997] BTC 624; [1997] ECHR 21319/93
Ozturk v Germany HRC(1984) 6 EHRR 409
Radiom & Shingara (Joined Cases C-65/95 and C-111/95) [1997] ECR I-3343
R (Alconbury Ltd) v Secretary of State for the Environment, Transport and the Regions UNKUNKWLR[2001] UKHL 23; [2001] 2 All ER 929; [2001] 2 WLR 1389
R v Spear WLRELR[2001] 2 WLR 1692; [2001] QB 804
Scanfuture UK Ltd v Secretary of State for Trade and IndustryICRUNK[2001] ICR 1096; [2001] IRLR 416
Starrs and Chalmers v Procurator Fiscal [2000] HRLR 191
Upjohn Ltd v Licensing Authority WLR[1999] 1 WLR 927; [1999] ECR I-223
Human rights - Whether civil rights and obligations of taxable person engaged - Whether tribunal independent and impartial - Whether assessment, default surcharge, misdeclaration penalty, late registration penalty and requirement to provide security are criminal in nature - Right to a fair trial - Whether review jurisdiction of tribunal affords taxable person a fair hearing - European Convention on Human Rights, art. 6; Value Added Tax Act 1994, Sch. 11, para. 4(2).
The preliminary issues in combined appeals concerned the rights, if any, under art. 6 of the European Convention on Human Rights, of taxable and potentially taxable persons in receipt of VAT assessments, default surcharge assessments, misdeclaration, late registration and civil penalty notices or notices of requirement for security. If art. 6 applied, the next issue was whether the tribunal and its procedures afforded the person a fair and independent hearing within a reasonable time and by an independent and impartial tribunal.
The first issue for the tribunal was whether the penalties, assessments and notice of requirement for security were "civil rights and obligations" under art. 6(1) of the Convention. The commissioners relied on the decision of the European Court of Human Rights in Ferrazzini v Italy (Application No. 44759/98) for their submission that art. 6 confers no rights on the appellants as their cases involved "tax matters", which are outside the scope of civil rights and obligations. The appellants submitted that the Ferrazzini decision did not extend to the matters under appeal because, they argued, that case had been concerned solely with the dispute over the existence of an individual's tax obligations.
The second issue was whether appeals against the default surcharge, misdeclaration penalty, late registration penalty and requirement for security were within the "criminal charge" limb of art. 6(1). It was established in Han & Yau v C & E Commrs [2001] BVC 415 that civil evasion penalties imposed under s. 60 of the Value Added Tax Act 1994 were criminal charges for the purpose of art. 6. The appellants took the view that art. 6 extended to the other penalties in question. However, the commissioners argued that none of the penalties had any of the features of a criminal charge; they were all civil by nature and did not relate to behaviour that could be described as criminal. The penalties were neither severe nor penal.
The next question was whether the tribunal provided "a fair and independent" hearing by an "independent and impartial tribunal" within art. 6. The appellants contended that the constitution of the tribunal, when it consisted of one or more lay members, fell short of the requirements of art. 6. The feature of the tribunal's constitution relied on by the appellants in support of their challenge was that the commissioners were party to all appeals. They also had responsibility for the care and management of VAT and excise and customs duties. The government department responsible for these taxes was the Treasury and the Treasury had the statutory responsibility for the appointment of tribunal members. Those features, argued the appellants, gave rise to reasonable apprehension that the tribunal was biased.
The final issue was whether the tribunal provided a fair and independent hearing when its powers were limited to determining if the commissioners acted reasonably in exercising the power to require security. The tribunal considered whether art. 6 required it to read para. 4(2) of Sch. 11 to the 1994 Act as if it required the tribunal to assume the responsibility of protecting the revenue and so conferred on the tribunal a power to exercise a fresh discretion.
Held, as follows:
1. The decision of the European Court in Ferrazini was not applicable in the UK so far as rights and obligations relating to VAT were concerned. The obligations imposed by the tax and surcharge assessments, the penalty notices and the notices of requirement to provide security were within the scope of art. 6(1).
2. None of the surcharges or misdeclaration or late registration penalties at issue in this appeal could properly be classed as criminal charges within art. 6(1). They were regulatory, being designed to penalise the taxpayer's failure to reach the standard of compliance demanded by the VAT system. As for the requirement to provide security, the tribunal observed that it was not triggered by an offence, but was part of the regulatory code and was designed to ensure compliance in relation to the payment of future VAT liabilities. It did not, therefore, involve any criminal charge under art. 6.
3. Assessments for VAT were not in themselves criminal charges for the purposes of art. 6(1). An assessment taken together with a misdeclaration penalty could be regarded as criminal in nature, but an assessment alone could not rank as such. There is no offence to which the assessment and the obligations arising from it could relate and there was nothing penal or deterrent about it; it simply created an obligation to make good the VAT due under the tax code.
4. The tribunal was an independent and impartial tribunal providing a fair and independent hearing. The President and Chairmen in England and Wales were appointed by the Lord Chancellor and their independence was not in issue. The lay members were appointed by the Treasury, but the appointments, once made, lasted for five years. The Treasury had no say as to the composition of any particular tribunal and, although it had the power to remove members, this was strictly limited. Fair-minded and informed observers would be driven to conclude that lay members of the tribunal were both independent and impartial.
5. In situations in which the tribunal's powers are limited to determining whether the commissioners acted reasonably in exercising their power to require security, the tribunal provided a fair and independent hearing. The power given to the commissioners to protect the revenue was central to their duties of control and management. For the tribunal to substitute its own decision would undermine the commissioners' duties and nothing in the UK legislation or case law, or in case law on human rights permitted such a construction.
6. The distinction between civil and public rights and obligations drawn in Ferrazzini was not applicable in EC law. In contrast to the position in relation to art. 6, the requirement of effective judicial protection, in the Community sphere, was not limited to "civil rights" but extended to all rights deriving from Community law. However, an appeal on the merits was inevitably and always necessary in the appeal procedures of a member state. It was inappropriate, in the legal system of the UK, for the tribunal to have the power to substitute its own opinion for that of the commissioners in matters concerning risk to the revenue. The tribunal was sufficiently independent and impartial to satisfy the requirements of art. 6 and the requirements of EC law.
[The tribunal set out the facts summarised above and continued as follows.]
1. Article 6.1 of the European Convention on Human Rights entitles "everyone … to a fair and public hearing, within a reasonable time by an independent and impartial tribunal established by law" when their "civil rights and obligations" or any "criminal charge against (them)" fall to be determined. And, the person "charged with a criminal offence" is to be "presumed innocent until proven guilty" (art. 6.2) and to be granted the minimum rights set out in para. (a)-(e) of art. 6.3.
2. These appeals raise, as preliminary issues, the art. 6 rights, if any, of taxable and potentially taxable persons who have received:
•VAT assessments;
•default surcharge assessments;
•misdeclaration penalty notices;
•late registration penalty notices;
•civil penalty notices or; a
•notice of requirement to provide security.
3. Given that art. 6 applies in any of those instances, the next questions are whether the tribunal and its procedures afford the person in question "a fair and independent hearing", within "a reasonable time" and by "an independent and impartial" tribunal. Those questions depend on two further issues:
(i) does the constitution of the tribunal, with its members being appointed and removable by the Treasury (which, through the commissioners...
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