Revenue and Customs Commissioners v Higgins
| Jurisdiction | UK Non-devolved |
| Judgment Date | 26 September 2018 |
| Neutral Citation | [2018] UKUT 280 (TCC),[2018] UKUT 14 (TCC) |
| Date | 26 September 2018 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2018] UKUT 0014 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
Mr Justice Horner
Arthur Harvey QC and Ciaran Harvey, instructed by McCallion Keown, appeared for the appellant
Craig Dunford appeared for the respondent
Income tax – Income tax assessments – Best judgment – Confiscation order – Proceeds of crime – Agreed basis of plea – Tax liability – Assessment stage – Enforcement stage – Double recovery – Double jeopardy – Appeal dismissed – Proceeds of Crime Act 2002, s. 317(2) – TMA 1970, s. 29.
The Upper Tribunal (UT) remade the First-tier Tribunal (FTT) decision in Higgins [2015] TC 04259. The UT held that the FTT had made an error of law in attempting to challenge assessments, given that the taxpayer had not provided any relevant evidence. The UT also decided that it had been wrong in principle for the FTT to attempt to calculate whether any of a confiscation order paid by the taxpayer should have been offset against National Crime Agency (NCA) tax assessments.
Mr Higgins (the appellant) paid £400,000 to the Serious Organised Crime Agency (SOCA) under a confiscation order in respect of his prosecution for illegal waste disposal. The NCA (which was at the time of the offence SOCA) took over the general revenue functions of HMRC under the Proceeds of Crime Act 2002, s. 317(2). It issued discovery assessments and late payment penalties as the appellant’s accounts did not include any receipts from his criminal activity. Mr Higgins appealed against the assessments and penalties on the basis that his payment under the confiscation order included income tax, interest and penalties and to uphold the assessments and penalties would result in double recovery. The NCA submitted that the criminal court and confiscation order did not deal with any income tax arising from the appellant’s trading transactions as he had made no returns of income and expenses arising in those periods.
The FTT partly allowed the appellant’s appeal. It found that there was considerable confusion between the parties as to the terms on which the £400,000 paid under the confiscation order had been calculated. It decided that as it found that the benefit received from the appellant’s criminal activities was used as the basis of the calculation of the confiscation order and had been gross figures the confiscation order included an amount of tax. However as the FTT considered that the confiscation order had been reduced to reflect what the taxpayer could afford, the amount of tax paid as part of the confiscation order had to be proportionately reduced.
The appellant was granted leave to appeal to the UT on the basis that while an appeal could only be made on a point of law, it was arguable that no court acting judicially and properly instructed as to the relevant law could have come to the determination that the FTT did (per Edwards v Bairstow & Harrison (1955) 36 TC 207). The NCA cross appealed on the grounds that: (1) there were no challenges to the assessments and thus the FTT had no option but to confirm them; (2) any consideration of the confiscation order was entirely irrelevant; and (3) the findings of fact were findings that the FTT was entitled to reach and no point of law arose under Edwards v Barstow.
The UT considered that there were problems with the history of the relevant facts as detailed in the FTT’s decision, including how the £400,000 figure in the confiscation order was decided and what it represented. The UT also noted that the facts and circumstances outlined by the Court of Appeal in Higgins, R v [2017] NICA 12 (concerning an application to extend time to appeal) and the conclusions reached by the FTT respectively were contradictory and inconsistent.
The UT was satisfied that the FTT had not been equipped and did not have the information necessary to consider the basis of the assessment which had been made by the NCA, never mind being satisfied to the necessary standard that the assessments were incorrect. The FTT had reached its conclusion using information which had been specifically agreed for the purpose of the plea only and by making assumptions because the appellant did not offer any documentary records.
The UT dismissed the appellant’s appeal. It remade the decision so as to correct the error of law that arose from the FTT attempting to challenge the assessment of tax in the absence of any evidence being provided by the appellant to challenge the assessments. In the UT’s view when a taxpayer, as here, is appealing against a ‘best judgment’ tax assessment under TMA 1970, s. 29 the onus is on the taxpayer to prove the assessment is wrong and the appellant had chosen not to produce any such credible evidence.
More importantly, the UT decided that it was wrong in principle for the FTT to attempt at the assessment stage to calculate whether any, and if so, how much, of the confiscation order should be off set against the NCA tax assessments. The issue of double recovery was a matter to be raised at the enforcement stage, not on a challenge to any assessments and certainly not without adducing evidence to demonstrate that on the balance of probabilities the assessments were incorrect.
The UT also found there to be no substance to the double jeopardy argument put forward by the appellant.
As part of the taxpayer’s conviction for illegally disposing of waste he had paid a confiscation order. He had separately been assessed to tax by the NCA in relation to his illegal activities. The FTT got bogged down with exactly how the confiscation order had been calculated and whether it had included an amount for the unpaid tax. The UT decided that (1) the assessments had to stand because the appellant produced no evidence that they should not; and (2) any potential issue of double recovery should be challenged at the enforcement stage and not at the assessment stage.
| A. | INTRODUCTION | Page 1 | Paragraphs 1–5 |
| B. | FACTUAL BACKGROUND | Page 3 | Paragraphs 6–16 |
| C. | THE CASES MADE ON APPEAL | Page 17 | Paragraphs 17–18 |
| D. | RELEVANT STATUTORY PROVISIONS | Page 18 | Paragraphs 19–25 |
| E. | Page 21 | Paragraphs 26–27 | |
| F. | THE APPROACH TO BE TAKEN BY THE UPPER TRIBUNAL | Page 26 | Paragraphs 28–29 |
| G. | DISCUSSION | Page 29 | Paragraphs 30–40 |
| H. | CONCLUSION | Page 33 | Paragraphs 41–42 |
[1] Malachy Higgins (“the appellant”) appeals against the decision of the First Tier Tribunal (“FTT”) of 29 January 2015 in respect of income tax assessments for the years 1998/1999 to 2003/2004 made by the respondent, the National Crime Agency (“NCA”), formally SOCA adopting the general revenue function of HM Revenue and Customs (“HMRC”) having served Notices under section 317(2) of the Proceeds of Crime Act 2002 (“POCA”) that they were taking over the general revenue functions of the HMRC in respect of the appellant's tax returns for the years 1996/1997 to 2002/2003 and 2003/2004. The appellant's liability for tax had been assessed by NCA as follows:
- Income tax – £70,618.86.
- Class 4 NIC – £943.24.
- Interest – £35,100.13.
- Penalties – £42,937.26.Total: £149,599.69 less paid – £8,950Balance due – £140,649.69
[2] The FTT concluded that the confiscation order of £400,000 which had been paid by the appellant was a gross sum and must have included income tax. In the circumstances the FTT offset the amount paid by the appellant of £400,000 in respect of the confiscation order against what it calculated as the total sum due by the appellant, namely £517,624, leaving an outstanding liability of £117,624.
[3] Leave to appeal was granted by Tribunal Judge Harriet Morgan on the basis that while an appeal could only be made on a point of law, it was arguable that no court acting judicially and properly instructed as to the relevant law could have come to the determination that the FTT did. In other words she gave leave to appeal only on the well-recognised basis of Edwards (HMIT) v Bairstow (1955) 36 TC 207 although in somewhat ambiguous terms. She said:
[4] I consider that in accordance with rule 40 of the Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 whether to review the decision but decided not to undertake a review as I was not satisfied that there was an error of law in the decision.
[5] An appeal only lies in a question of law (under s.11 of the Tribunals, Courts and Enforcement Act 2007). This includes not only questions of pure law but also cases treated as a question of law, such as where a finding of fact had been made without sufficient evidence whereupon a view of the facts which could not be reasonably entertained or if the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination (on the principles set out in Edwards (HMIT) v Bairstow (1955) 36 TC 207).
[6] I consider that whether the Tribunal was correct in law (understanding a question of law to be as set out in 5) to draw the conclusions it did in the decision (as challenged by the appellant set out in 3) is not clear and, therefore, I have decided to give permission for the appeal to be made to the Upper Tribunal.
There is no distinction in law between questions of pure law and “cases treated as a question of law.”
[4] The NCA cross-appealed on the grounds that inter alia:
- There were no challenges to the assessments and thus the FTT had no option but to confirm them.
- Any consideration of the confiscation order made against the appellant by the Crown Court under section 156 of POCA was, as a matter of law, entirely irrelevant.
- The findings of fact were findings that the FTT was entitled to reach and no point of law arose under Edwards v Barstow.
[5] I would like to express my gratitude to counsel on both sides for their comprehensive, insightful and thought provoking submissions, both written and oral.
[6] Unfortunately, it is...
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