Nugent and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 04 May 2012 |
| Neutral Citation | [2012] UKFTT 329 (TC) |
| Date | 04 May 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 329 (TC)
Judge Ian William Huddleston
Mr. D. McNamee of McNamee Donnell Duffy appeared for the Appellant
Mr. James Puzey BL appeared for HMRC
The First-tier Tribunal decided that its rejection of a taxpayer's position in his interlocutory application operated as res judicata on the same issue in the appeal. The Tribunal further decided that the taxpayer's satisfaction of the lifestyle confiscation order arising from a criminal proceeding did not equate to the satisfaction of all his liability, including VAT and excise duty. The Tribunal found that the concept of benefit as it was used in the confiscation order or the Proceeds of Crime Act 2002 ("POCA 2002") did not and could not equate with the same concept as a liability for tax under Finance Act ("FA 1994") or the Value Added Tax Act 1994 ("VATA 1994").
The taxpayer appealed against HMRC's best judgment assessments arising out of the illegal smuggling of fuel across the border between Northern Ireland and the Republic of Ireland.
The taxpayer conducted two fuel service stations. HMRC made assessments arising out of his evasion of excise duty and VAT in relation to deliveries of smuggled road fuel to his service stations. The smuggling activity led to his criminal prosecution to five specific counts of evasion of duty under the Customs and Excise Management Act 1979, Customs and Excise Management Act 1979 section 170 subsec-or-para 2s. 170(2). He pleaded guilty to all five counts and was sentenced to a suspended term of imprisonment. He was likewise made the subject of a confiscation order in the sum of £17,810.13 under the Proceeds of Crime Order (Northern Ireland) 1996. He satisfied the confiscation order in due course.
The taxpayer appealed the assessments and made an interlocutory application for his appeals to be allowed on the basis that HMRC's pursuit of such assessments subsequent to the criminal proceedings and the issue of the confiscation order was an abuse of process. The Tribunal decided against the application, saying that the lifestyle confiscation order did not preclude the Tribunal from hearing an appeal in respect of the assessments to tax that had been raised. The Tribunal also found that there were technically no civil proceedings commenced at the time when the confiscation order was made.
Subsequent to the interlocutory proceedings, the taxpayer wrote to the Tribunal to make it clear that his appeal was proceeding solely on the ground that the confiscation order removed any liability on him to pay either VAT or excise duty. He stated that he would not adduce evidence or otherwise challenge the basis of the assessments.
The taxpayer argued that the lifestyle confiscation order obtained by HMRC against him satisfied to that point in time all his liability to HMRC. However, he did not argue that the existence of such confiscation order excluded civil proceedings to recover tax and duty owing. He further argued that his application was premised upon the assertion that the satisfaction of the confiscation order equated to the satisfaction of all liability including tax and duty to HMRC. He then distinguished the case on which HMRC relied, R & C Commrs v CrossmanUNK [2007] EWHC 1585 (Ch) ("Crossman"), on the basis that he had his criminal benefit calculated by the Court in the sum of £17,810.13. He argued that unlike Crossman, his criminal benefit equated to his full tax liability pursuant to POCA 2002, Proceeds of Crime Act 2002 section 158 subsec-or-para 2s. 158(2). Having paid the amount in full, he argued that he had no further liability to HMRC in law or in fact.
HMRC argued that the Tribunal had already considered the taxpayer's arguments and that, having been discounted at the interlocutory stage and not having been then appealed, they were already res judicata. HMRC said that the taxpayer's benefit arising from criminal conduct was not the same thing as the amount of duty evaded as a result of his actions. They added that the assessments to duty were stayed pending the outcome of the criminal proceedings, and that the civil and criminal proceedings could co-exist. They asserted that the mere fact that they sought the lifestyle confiscation order did not preclude the Tribunal from hearing an appeal against an assessment to duty and was not an abuse of process or a breach of the taxpayer's human rights.
(2) Whether the ruling of the Tribunal on the taxpayer's position in the interlocutory proceedings operated as res judicata on the same issue in the present appeal.
(3) Whether the taxpayer's satisfaction of the lifestyle confiscation order equated to the satisfaction of all his liability, including VAT and excise duty, to HMRC.
Held, dismissing the taxpayer's appeal:
The Tribunal held that, in essence, the taxpayer's position both in the interlocutory proceedings and this appeal was that the confiscation order mopped up all of his liability arising from his criminal conduct. His position was rejected as part of the interlocutory application and, to the extent that it was rejected, the principles of res judicata applied. Hence, the taxpayer was not allowed to retry the issue before the Tribunal.
The Tribunal found that the concept of benefit as it was used in the confiscation order or the POCA 2002 did not and could not equate with the same concept as a liability for tax under FA 1994 and/or VATA 1994. The Tribunal rejected the taxpayer's proposition that POCA 2002, Proceeds of Crime Act 2002 section 158 subsec-or-para 2s. 158(2) effectively operated as a cap on liability. The Tribunal explained that all that the provision said was that the court should take account of conduct occurring up to the time it made its decision and of the property obtained up to that time.
There could be a degree of overlap in some cases based on a single factual matrix but, where such overlap existed, there was a limit on recovery so that the same property was not accounted for twice. Indeed, that point was made in the interlocutory proceedings themselves. It logically followed that where there had been recovery on foot of the confiscation order which, to some extent, encompassed a confirmed tax liability, then the amounts recovered ought to be brought into account when the collection of tax was undertaken. That principle was clearly reflected in the case of Crossman.
HMRC had a statutory prerogative pursuant to VATA 1994, Value Added Tax Act 1994 section 73s. 73 and FA 1994, Finance Act 1994 section 12s. 12 to assess tax they felt had not been returned. In the absence of detail, those assessments could be made to best judgment. In this case, the appeal was duly made against those assessments, but the taxpayer had chosen not to advance evidence to disprove or, indeed, in any way challenge those assessments or, indeed, to engage the Tribunal in an analysis of how a proper assessment to the tax and duty evaded could be arrived at. Thus, as there was no contrary evidence or challenge to the assessments, the Tribunal concluded that the assessments should stand.
1.The appeals in this case relate to a number of assessments, to both excise duty and VAT, arising out of the illegal smuggling of fuel across the border between Northern Ireland and the Republic of Ireland.
2.In summary, the relevant assessments are as follows:
(2) the Appeal MAN/08/0087 relates to an assessment dated 20 August 2004 in relation to the evasion of excise duty and was jointly raised against Michael Nugent (the Appellant in this case) and a Mr. Brian Gorman. It was originally raised in the amount of £531,797 which, on review, was reduced to a figure of £522,923 (based on duty evaded (assessed to best judgment)) on approximately 201,766 litres of fuel;
(3) the Appeal MAN/08/0082 relates to a best judgement assessment in respect of VAT assessed on the joint trading of Messrs. Nugent and Gormley which, again, was originally raised in the sum of £128,727 which was subsequently reduced to £102,234 on review;
(4) the Appeal MAN/07/8094 relates to a best judgment assessment raised solely against Michael Nugent in the sum of £259,821 for evaded excise duty;
(5) the Appeal TC/2009/10142 relates to a best judgment assessment to VAT raised against Mr. Nugent in respect of the trading period 1 June 2003 to the 20 February 2004. It was originally raised in the sum of £55,300 but was reduced on review to £48,830.
3.Each assessment is raised to "best judgment" pursuant to (in the case of excise duty) Finance Act 1994 section 12Section 12 of the Finance Act 1994 and (in respect of VAT) pursuant to the powers vested in HMRC pursuant to Value Added Tax Act 1994 section 73 subsec-or-para 1Section 73(1) of the Value Added Tax Act 1994 ("VATA").
4.Mr. Gorman appears not to have taken any active interest in relation to any of the appeals and the present appeal is brought solely by Mr. Michael Nugent (the Appellant) although it is technically brought against all of the assessments raised against him.
5.The assessments arise out of the evasion of excise duty and VAT in relation to deliveries of smuggled road fuel to two services stations. The first station was known as Bridge Service Station, Main Street, Toomebridge, County Antrim. It is asserted by HMRC that the business operated there was jointly conducted by both Messrs. Gorman and Nugent and on that basis the relevant assessments have been raised jointly and severally against them.
6.The second fuel service station was known as Molly Sweeney's Service Station at Gortin Road, Omagh, County Tyrone. HMRC asserted that this filling station was operated solely by Mr. Michael Nugent who has been assessed on his...
To continue reading
Request your trial