Martin
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 May 2012 |
| Neutral Citation | [2012] UKFTT 304 (TC) |
| Date | 04 May 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 304 (TC)
Ian William Huddleston, Tribunal Judge
Mr. D. McNamee, Solicitor, appearing on behalf of the Appellant
G. Forbes appeared for HMRC
The First-tier Tribunal decided that HMRC properly raised discovery assessments against the taxpayer in accordance with Taxes Management Act 1970 ("TMA 1970"), Taxes Management Act 1970 section 29s. 29, despite the confiscation order issued under the Proceeds of Crime Act 2002 ("POCA 2002") against the taxpayer in relation to his criminal benefit. The disputed assessment periods covered a much wider period than the period encompassed within the confiscation order. The taxpayer did not adduce any evidence as to inaccuracies or other deficiencies in those assessments and thus failed to discharge his onus of proof to set them aside.
The taxpayer appealed against the discovery assessments raised by HMRC pursuant to TMA 1970, Taxes Management Act 1970 section 29s. 29 in respect of the eight tax years ending 5 April 2001 to 5 April 2008, inclusive.
The taxpayer was convicted of a number of offences in relation to breach of trademark and dealing in the proceeds of crime. The prosecution then applied for a confiscation order to be made under the Proceeds of Crime Act 2002 ("POCA 2002"). On 3 February 2009, a confiscation order was made in the amount of £55,316. The amount was reduced to £35,116 on appeal.
In February 2009, HMRC wrote to the taxpayer indicating that they commenced an investigation into his tax affairs. Following a chain of correspondence, HMRC raised the disputed assessments. The taxpayer then communicated to HMRC that he felt that the assessments were incorrectly raised. HMRC subsequently asked the taxpayer to produce information as to his sources of income and certain details in respect of his ownership of property. They also sought a copy of the confiscation order. The taxpayer did not provide information in response to the specific requests from HMRC.
HMRC submitted that they raised the discovery assessments on the basis that the taxpayer failed to return self-employment income or trading profits. They said that his declared and taxed earnings would have been insufficient to maintain or achieve either his lifestyle or his property holdings. Thus, they assessed the taxpayer of his undeclared taxable income based on what they believed to have been his profits in order to build and furnish a home and maintain that property and lifestyle.
The taxpayer submitted that the criminal benefit from his conduct had been calculated and the confiscation order had been made in relation to that benefit. Any further recovery of monies by HMRC would be double recovery. He asserted that all of the tax liability which arose on foot of the assessments had been encompassed within the calculation of benefit which resulted in the confiscation order. He relied upon the case of HMRC v Richard Alan Crossman (Junior)UNK [2007] EWHC 1585 (Ch) ("Crossman") for this contention.
HMRC accepted that the confiscation order was made in respect of a six-year period from 17 March 1999 to 16 March 2005, but pointed out that only the tax periods 2000-01 up to 2004-05 fell within that six year period. The period through which the benefit was assessed was shorter than the tax periods through which the discovery assessments had been raised. They felt that the taxpayer was still involved in the purchasing, distribution and sale of non-UK paid counterfeit cigarettes in August 2005. They also asserted that the taxpayer had been in receipt of income prior to the benefit period in question, none of which he returned to HMRC.
HMRC accepted that the amounts assessed might be reduced to the extent that the tax had been received by the Crown based on the confiscation order, applying the principles set out in Crossman. However, they stated that Crossman had no impact on their obligations to make assessments of tax where it was apparent that the taxpayer had not fulfilled his statutory obligations, or to collect the tax where it had not been encompassed within the confiscation order. HMRC submitted that they raised the assessments to establish the proper amount of tax which was due by the taxpayer based on best judgment pursuant to TMA 1970, Taxes Management Act 1970 section 29s. 29.
(2) Whether HMRC properly raised the disputed assessments against the taxpayer despite the confiscation order made in relation to his criminal benefit.
(3) Whether the confiscation order covered all the tax liability of the taxpayer arising out of the disputed periods.
Held, dismissing the taxpayer's appeal:
The Tribunal explained that TMA 1970, Taxes Management Act 1970 section 29s. 29 allowed HMRC wide powers to issue discovery assessments upon taxpayers where they felt they had not been appraised of the information upon which to raise a proper assessment. Where such assessment had been raised, the onus of proof fell upon the taxpayer to set it aside. Here, the taxpayer had not adduced any evidence to disprove or otherwise challenge the assessments raised in this case. Instead, he sought to focus upon the effect of the confiscation order to ground his argument that fundamentally, the said order mopped up any potential liability on the basis that a lifestyle confiscation order was both sought and granted.
With respect to the second issue, the Tribunal explained that in POCA 2002, Proceeds of Crime Act 2002 section 156s. 156 allowed a criminal court the ability to assess the benefit arising from general criminal conduct. The court should first assess the benefit which had been derived from the conduct and should it find that benefit had occurred, it should then assess the extent of the realisable property which would be available to discharge it.
In the criminal proceedings, the prosecutor attributed the amount of benefit derived from the taxpayer's general criminal conduct to be between £55,516 and £89,291. The...
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