R v Dimsey (on Appeal from the Court of Appeal (Criminal Division))
| Jurisdiction | England & Wales |
| Judge | LORD BINGHAM OF CORNHILL,LORD NICHOLLS OF BIRKENHEAD,LORD STEYN,LORD HUTTON,LORD SCOTT OF FOSCOTE |
| Judgment Date | 11 October 2001 |
| Neutral Citation | [2001] UKHL 46 |
| Date | 11 October 2001 |
| Court | House of Lords |
[2001] UKHL 46
HOUSE OF LORDS
Lord Bingham of Cornhill
Lord Nicholls of Birkenhead
Lord Steyn
Lord Hutton
Lord Scott of Foscote
My Lords,
I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Scott of Foscote. For the reasons he gives I would answer the certified question as he proposes and dismiss the appeal.
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Scott of Foscote. For the reasons he gives I too would dismiss this appeal.
My Lords,
I have read the opinion of my noble and learned friend Lord Scott of Foscote. For the reason he gives I would also dismiss the appeal.
My Lords,
I have had the benefit of reading in draft the speech of my noble and learned friend Lord Scott of Foscote with which I am in full agreement. For the reasons he gives I too would dismiss this appeal.
My Lords,
Section 18 of the Finance Act 1936 ( 26 Geo 5 + 1 Edw 8, c 34) enacted important and far-reaching provisions designed to counter tax avoidance by the transfer of assets abroad. Various amendments and additions to the original provisions have been made since then but the broad scheme established in 1936 remains in force. The current provisions are to be found in sections 739 to 746 of the Income and Corporation Taxes Act 1988.
Subsection (1) of section 739, which in section 18 of the 1936 Act took the form of a preamble, expresses the purpose of the statutory provisions:
"(1) The following provisions of this section shall have effect for the purpose of preventing the avoiding by individuals ordinarily resident in the United Kingdom of liability to income tax by means of transfer of assets by virtue or in consequence of which, either alone or in conjunction with associated operations, income becomes payable to persons resident or domiciled outside the United Kingdom."
Subsection (2) contains the principal provision whereby the tax avoidance consequences of the transfer abroad are sought to be negated:
"(2) Where by virtue or in consequence of any such transfer, either alone or in conjunction with associated
operations, such an individual has, within the meaning of this section, power to enjoy, whether forthwith or in the future, any income of a person resident or domiciled outside the United Kingdom which, if it were income of that individual received by him in the United Kingdom, would be chargeable to income tax by deduction or otherwise, that income shall, whether it would or would not have been chargeable to income tax apart from the provisions of this section, be deemed to be income of that individual for all purposes of the Income Tax Acts".
The potential breadth of this provision was cut back by the decision in your Lordships' House in Vestey v Inland Revenue Commissioners. It was held that the provision (then section 412 (1) of the Income Tax Act 1952) applied only to the individual or individuals who had sought to avoid tax by transferring assets abroad and did not apply to individuals simply because they might become the recipients of income or capital derived from those assets. A tax liability was later imposed by section 45 of the Finance Act 1981 (now section 740 of the 1988 Act) on the actual recipients of income or capital derived from the transferred assets.
My Lords, the issue on this appeal is a short one. It is whether section 739 (2), deeming the income of the foreign transferee to be the income of the tax avoider/transferor, impels the corollary that that income is for tax purposes to be deemed not to be the income of the foreign transferee.
This issue does not arise out of a dispute between the revenue and a foreign transferee as to the tax liability of the latter. This should not be thought surprising. Foreign transferees are in general chosen by tax avoiders for their invulnerability to tax demands by the revenue. They do not submit tax returns and then engage in disputations with the revenue as to the extent of their liability. This issue arises out of criminal proceedings taken against the tax avoider and his associates. I must explain how it comes about.
The Facts
The appellant, Dermot Jeremy Dimsey, is resident in Jersey. Via a Jersey company, DFM Consultants Ltd, the appellant provides financial services to clients. These services include setting up off-shore companies for persons resident in the United Kingdom and the administration of these companies. One of the appellant's clients was a Mr Chipping, a resident in the United Kingdom. Mr Chipping became involved as an intermediary in the supply of avionic equipment to South Africa. On Mr Chipping's instructions the appellant formed two off-shore companies, Thomlyn Supplies Ltd. ("Thomlyn") and Glenville Supplies Ltd ("Glenville") to deal with the South African contracts that Mr Chipping had obtained. Mr Chipping was the beneficial owner of the shares in and was in control of the two companies.
The South African contracts were signed by the appellant in Jersey on behalf of the companies. The profits made by Thomlyn were £664,057 and by Glenville were £582,000 (see the judgment of the Court of Appeal given by Laws LJ [2000] QB 744, 751. The appellant arranged for the issue of credit cards in the names of the two companies but for the personal use of Mr Chipping. He arranged for the payment by the companies of liabilities incurred through Mr Chipping's use of these cards for personal expenditure.
The appellant set up a third off-shore company, Lantau Investments Ltd. ('Lantau'), for Mr Chipping. Lantau was not a trading company but was used as a receptacle for some of the profits derived from the South African contracts. A flat in England for the use of a member of Mr Chipping's family was acquired by Lantau.
In September 1993 the revenue began an investigation into Mr Chipping's tax affairs. The appellant assisted Mr Chipping in providing false and misleading information to the revenue regarding the three off-shore companies, the South African contracts and certain bank accounts that Mr Chipping held in Jersey. A solicitor in England, Mr Da Costa, had been retained by Mr Chipping to act for him in the Inland revenue investigation. He, too, played a part in the provision of this false and misleading information.
In due course the revenue commenced criminal proceedings against Mr Chipping, Mr Da Costa and the appellant. There were eleven counts. All bar one, count 10, were counts under which Mr Chipping alone was accused of cheating the revenue. He pleaded guilty to counts 1 to 8, which related to undeclared taxable income for the years 1986/87 to 1993/4 and to income and benefits derived from Thomlyn, Glenville and Lantau. He was convicted at trial on the other two counts of cheating the public revenue. One of these counts related to £200,000 odd, which had been paid by Thomlyn and/or Glenville to Lantau as, in effect, nominee for Mr Chipping. The other count charged Mr Chipping with cheating the revenue of corporation tax by concealing the existence of profits made by the off-shore companies.
Count 10, the only count under which the appellant and Mr Da Costa were charged, alleged a conspiracy contrary to section 1(1) of the Criminal Law Act 1977. The alleged conspirators were Mr Chipping, Mr Da Costa and the appellant. The particulars were that the three accused:
"Between 1 January 1993 and 8 July 1994, conspired together, with intent to defraud and to the prejudice of Her Majesty the Queen and the Commissioners of Inland Revenue, to cheat Her Majesty the Queen and the Commissioners of Inland Revenue of public revenue by failing to make full and complete disclosure to the Commissioners of Inland Revenue of:
(i) [Mr Chipping's] worldwide assets and liabilities;
(ii) income and benefits which had derived from off-shore companies which he, [Mr Chipping], managed and controlled, namely [Glenville, Lantau, Thomlyn];
(iii) profits made by the said off-shore companies which he [Mr Chipping] managed and controlled;
(iv) interest received by [Mr Chipping] which was derived from bank accounts held at the Royal Trust Bank (Jersey) Ltd."
Particular (i) was deleted during the course of the trial. Particular (ii) related only to the sum of £200,000 odd that had been paid to Lantau and to the sums charged to the Thomlyn and Glenville credit cards. Particular (iv) related to interest on the Jersey bank accounts. The revenue have conceded that a conviction could not be upheld on the basis of particular (iv) alone.
Particular (iii) is, for present purposes, the most important. At the trial the revenue ran their case under particular (iii) on the footing that the conspirators had attempted to cheat the revenue of corporation tax due from the three off-shore companies. These companies, it was said, were liable to corporation tax because they were resident in the United Kingdom. They were resident in the United Kingdom because the management and control of their respective businesses took place in the United Kingdom. The profits of the three companies were, therefore, liable to attract corporation tax. There was no mention at the trial of section 739 of the 1988 Act. No one took the point that under section 739 the income of each of the three companies was deemed to be the income of Mr Chipping. This point only emerged in the Court of Appeal.
The jury convicted all three defendants on count 10. Mr Doyle, one of the junior counsel for the appellant, has pointed out that it is not possible to know which of the particulars constituted the basis on which the jury brought...
To continue reading
Request your trial
-
R (Cooke) v HM Revenue and Customs
...TC 56 at page 79. He also took me to various passages in the speeches of their Lordships both in the latter case and also in R v Dimsey [2001] UKHL 46, [2002] 1 AC 509. I have to say, with respect, that none of this was of the slightest assistance. 43 In the first place, those cases were co......
-
R v Roger George Doncaster
...well established that section 76 does not protect lies as though they were confessions: R v. Allen [2001] UKHL 45, reported together with R v. Dimsey [2001] UKHL 46, [2002] 1 AC 509 at para 35, R v. Gill at para 42. We therefore think that the judge was right to rule that section 76 was no......
-
BNP Paribas SA (London Branch)
...both of them) are likely to be outside the charge to tax in respect of such dividends. As the House of Lords' decision in R v Dimsey TAX[2001] BTC 408 (at [56] to [60]) shows, in the context of an anti-avoidance provision, such largely theoretical possibilities should not distort the constr......
-
Davies and Others
...Finance Act 1936 and the current provisions continue to reflect the broad scheme of what was enacted as long ago as 1936: see R v Dimsey [2001] BTC 408 at [5] per Lord Scott. The relevant facts [21] The FTT made the following findings as to the facts which were relevant to the statutory pro......
-
Smuggling, Confiscation and Forfeiture
...QB 744; [2000] 2 All ER 142, on appeal from RvDimsey;RvAllen [1999] STC846, [1999] 8 CL 555. The further appeals in these cases (RvAllen [2001] UKHL 46; RvDimsey[2001] UKHL 45) do not touch upon this question.33 As was required by Criminal Justice Act 1988 s 71(5).34 He further contended th......