UK Court Of Appeal Awards Criminal Rights To Tax Evasion Defendants

by Amanda Banks, Tax-News.com, London

05 July 2001

In a landmark case over the Human Rights Act, the UK Court of Appeal ruled on Tuesday this week that defendants faced with tax evasion allegations will be given the same rights as defendants in a criminal court of law. The decision came about from the Customs & Excise case brought against Geong Kwan Han & David Yau, two owners of a Chinese takeaway, for non-payment of VAT.

Originally, the case was heard in the VAT & Duties Tribunal in December last year when the judge decided in favour of the defendants. Customs & Excise took the verdict to the Court of Appeal but to no avail as Andrew Young, a lawyer from Pricewaterhouse Coopers representing the defendants, successfully argued that the Customs & Excise practice of treating tax evasion as a civil offence is in breach of the Human Rights Act 1998.

After the ruling, Michael Bailey, a partner at PwC, stated: 'The outcome of this case will lead to a fundamental change in English law. We have been able to argue that anyone charged with tax evasion, or similar tax offences, should have recourse to legal representation at the time of questioning, should be given the same protection as if they were tried in a criminal case, and have the right to a full and fair hearing.' He added that case is likely to 'open the floodgates' to appeals in hundreds of previous cases.

Customs & Excise expressed its disappointment at the outcome but said it was considering an appeal to the House of Lords. The department stated: 'We do not think our civil regime is incompatible with the Human Rights Act. The tribunal in this case still has to be heard.'

Sharing the department's dismay are the tax experts at KPMG with the statement: 'KPMG is disappointed that a much-awaited Appeal Court decision has ... left the UK's tax penalties system in confusion. Tax practitioners were hoping for guidance on the practical effect of tax penalties being classified as "criminal proceedings" for human rights purposes in ... [the] Han & Yau case.'

Tom Murray, KPMG's UK head of tax investigations said: 'One concern in particular is that many tax settlements involving penalties are based on material provided voluntarily by the taxpayer as part of a well-established process leading to a financial settlement. If this is inadmissible as evidence because it is self-incriminatory it may both be very difficult for the tax authorities to bring penalty proceedings sucessfully and for advisers to advise on matters of disclosure and cooperation.'

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