Khan v Director of Assets Recovery Agency
| Jurisdiction | England & Wales |
| Judgment Date | 23 February 2006 |
| Date | 23 February 2006 |
| Court | Special Commissioners (UK) |
special commissioners decision
Stephen Oliver and Theodore Wallace
Lawrence Power, counsel, instructed by J H Law, solicitors, for the Appellant
Tamara Solecki, barrister, of the Solicitor's office of the Assets Recovery Agency, for the Respondents
Proceeds of crime - General Revenue function - Assessment to tax by Director - Whether Special Commissioners have the power to allow appeal on basis that qualifying conditions for exercise of Director's Revenue functions are not satisfied - Yes - Whether art. 6 ECHR applies to Director's tax assessment - No - Whether retrospective effect of assessment affects its validity - No - What standard of proof is required in relation to satisfaction of qualifying condition requiring Director to establish reasonable grounds for suspicion that income has arisen as a result of criminal conduct - Whether Appellant's rights under art. 1 of First Protocol have been violated - No - Whether proceedings breached Appellant's rights under art. 7 - No - PoCA 2002 s. 317(1) - TMA 1970 s. 29 - Human Rights Act 1998 s. 6 - ECHR art. 6 & 7 and art 1 of First Protocol
1. This decision concerns a series of preliminary issues arising in the appeal by Mr Khan against assessments by the Director to income tax under Cases I and III of Schedule D and National Insurance Contributions under Class 4 for the years 1998/99 to 2001/02.
2. The assessments for the four years total £49,185 tax and £5,597 contributions on estimated undeclared income of £174,186 for the period, compared with £55,144 shown on the Appellant's returns. The assessments which were issued on 1 June 2004 were discovery assessments made under Taxes Management Act 1970 section 29 subsec-or-para 4section 29(4) or (5) of the Taxes Management Act 1970. Paragraph 18.1 of the Respondent's further particulars of claim allege negligent or fraudulent conduct.
3. On 24 February 2004 the Director served on the Inland Revenue Commissioners a notice under Proceeds of Crime Act 2002 section 317section 317 of the Proceeds of Crime Act 2002 ("PoCA" ) in relation to the Appellant for the years in question which vested in her the general functions of the Revenue in respect of income tax and insurance contributions.
4. The Appellant was charged on 23 May 2001 with money laundering offences and was committed for trial with others at Leeds Crown Court. Essentially it was alleged that he acted as a courier of money arising from drug trafficking and other criminality. He denied the charges.
5. On 13 October 2003 at Leeds Crown Court Judge Wolstenholme having heard medical evidence stayed the indictments against the Appellant because of his ill health and ordered that the indictments should not be proceeded with without the leave of the Court. The judge considered that to put the Appellant through a trial would involve an unacceptably high risk of heart attack. He made no findings as to his fitness to plead.
6. Before the present hearing there have been four directions hearings in this appeal. The first three hearings, on 16 November 2004, 21 April 2005 and 25 July 2005, were primarily concerned with the effect of the Appellant's ill health on the appeal. Further medical reports were obtained before the July hearing which indicated that the Appellant's condition was substantially the same as at the time of the Crown Court proceedings.
7. At the time of the July hearing there were also outstanding appeals against penalties underTaxes Management Act 1970 section 95 section 95 of TMA ("TMA" ) 1970 of 80 per cent totalling £43,825. The penalties clearly involved criminal charges for the purposes of article 6 of the European Convention on Human Rights ("ECHR" ), seeKing v United Kingdom (No 2)TAX[2004] BTC 911. Following the July hearing the Director withdrew the penalties so that the appeal is now solely concerned with the assessments under Taxes Management Act 1970 section 29section 29.
8. After a purely procedural hearing on 26 October 2005 it was directed that a series of preliminary issues raised by the Appellant should be considered at a hearing on 7 December 2005. The preliminary issues are now dealt with separately.
9. The relevance of the question arises from the argument for Mr Khan, advanced by Lawrence Power, which is based on the contention that the Special Commissioners must be able to entertain and give affect to a challenge, if successful, to a Director's assessment on the basis that it does not satisfy the qualifying condition in Proceeds of Crime Act 2002 section 317 subsec-or-para 1section 317(1). Otherwise there would, for example, be a violation of Mr Khan's rights to a fair hearing or a denial of natural justice.
10. Miss Solecki submitted that the Special Commissioners have no power to vary or discharge an assessment under section 29 which is validly made except under Taxes Management Act 1970 section 50 subsec-or-para 6section 50(6) or (7) of TMA. She also submitted that the words "in respect of the exercise" in Proceeds of Crime Act 2002 section 320section 320 of PoCA do not cover the qualifying condition in Proceeds of Crime Act 2002 section 317section 317 and that any challenge to such condition must be by judicial review.
11. The relevant statutory provisions of PoCA are found in Part 6 which is headed "General Revenue functions". Section 317 , so far as is relevant, reads as follows:
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(1) For the purpose of this section the qualifying condition is that the Director has reasonable grounds to suspect that -
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(a) income arising or a gain accruing to a person in respect of a chargeable period is chargeable to income tax or is a chargeable gain (as the case may be) and arises or accrues as a result of the person's or another's criminal conduct (whether wholly or partly and whether directly or indirectly),
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(b) …
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(2) If the qualifying condition is satisfied the Director may serve on the Commissioners of Inland Revenue (the Board) a notice which-
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(a) specifies the person … and the period, and
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(b) states that the Director intends to carry out, in relation to the person … and in respect of the period, such of the general Revenue functions as are specified in the notice.
(3) …
(4) The Director -
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(a) may at any time serve on the Board a notice of withdrawal of the notice under subsection (2);
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(b) must serve a notice of withdrawal on the Board if the qualifying condition ceases to be satisfied.
12. Taxes Management Act 1970 section 30A subsec-or-para 4Section 30A(4) of TMA provides that an assessment shall not be altered except in accordance with the express provisions of the Taxes Act. The assessment appealed against by Mr Khan purports to be a "discovery " assessment made under Taxes Management Act 1970 section 29 subsec-or-para 1section 29(1); Taxes Management Act 1970 section 29 subsec-or-para 8section 29(8) provides that an objection to such an assessment "shall not be made otherwise than as an appeal against the assessment". Taxes Management Act 1970 section 31 subsec-or-para 1Section 31(1)(d) gives the taxpayer the right of appeal against an assessment.
13. Taxes Management Act 1970 section 50 subsec-or-para 6Section 50(6) of TMA provides, so far as is relevant:
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(6) If, on an appeal, it appears to the majority of the Commissioners present at the hearing, by examination of the appellant on oath or affirmation, or by other … evidence, -
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(a) …; or
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(b) that the appellant is overcharged by an assessment other than a self-assessment,
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the assessment or amounts shall be reduced accordingly, but otherwise the assessment or statement shall stand good.
14. Does Taxes Management Act 1970 section 50 subsec-or-para 6section 50(6) restrict the jurisdiction of the Special Commissioners to simply reducing an assessment assessed on the grounds that the assessment is excessive: or does it authorize the Special Commissioners to examine an assessment with a view to deciding its validity and, if it is invalid, to reduce the amount assessed to a nil figure? We do not read section 50(6) as limiting our jurisdiction to the former role. Nor do we see that Proceeds of Crime Act 2002 si-number section 317 subsec-or-para 4section 317(4) of PoCA restricts us in this respect; that provision deals not with the jurisdiction of the Special Commissioners, but with the Director's administrative powers to carry out general Revenue functions.
15. The jurisdiction of the Special Commissioners is not limited to situations where the taxpayer claims to have been overcharged by a valid assessment. The jurisdiction covers situations where the taxpayer contends that there is no charge on grounds that the document purporting to be the assessment is invalid or ineffective. The most usual case is where the assessment is challenged as being out of time. Another example is where the taxpayer contends that the assessment is on the wrong person (e.g. where the assessment is on him as an individual whereas he claims he should have been assessed as a trustee). A further example of a challenge to the validity of the assessment that falls within the Special Commissioners' jurisdiction is where the taxpayer contends that the assessing officer did not have had the Board's authority to make the assessment. The words of Taxes Management Act 1970 section 50 subsec-or-para 6section 50(6) do not, expressly or by necessary implication, restrict the scope of the appeal commissioners and prevent them from examining the validity of the assessment on those grounds.Indeed Taxes Management Act 1970 section 29 subsec-or-para 8section 29(8) expressly provides for an appeal on the grounds that neither of the conditions in subsections (4) and (5) are fulfilled.
16. So here we...
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Serious Organised Crime Agency v Fenech
...that on the appeal of any assessment before the FTT, it is open to the Respondent to challenge the s 317 condition – see Khan v Director of the Assets Recovery Agency [2006] STC (SCD) 154: "15. The jurisdiction of the Special Commissioners is not limited to situations where the taxpayer cla......
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Chadwick (as trustee in bankruptcy of Oduneye-Braniffe)
...Masi points, as the approach to be adopted, to the decisions of the Special Commissioners in Khan v Director of Assets Recovery Agency (2006) Sp C 523 (“Khan”) as applied by this Tribunal in Fenech [2013] TC 029446 (“Fenech”). In Khan at [39] the Special Commissioners (Stephen Oliver QC and......
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Goldsmith
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