Probate law

By Lesley King, College of Law, London

Income tax returns and the Human Rights Act King v Walden (2001) The Times, 13 May and LTL, 6 June 2001 In the above case Mr Justice Jacob had to consider whether the imposition of penalties for fraudulent or negligent delivery of incorrect income tax returns was criminal for the purposes of the Human Rights Act.

(Similar considerations will presumably apply to cases involving inheritance tax penalties).In January 1989 the Inland Revenue assessed the taxpayer to tax for a number of years of assessment.

In 1991 the Inland Revenue Commissioners dismissed the taxpayer's appeal.

In 1991 and in 1994 the Revenue issued interest and penalty assessments.

The penalty was set at 80% of the tax lost.

In 1996 the Revenue issued further assessments as the result of the discovery of undisclosed assets.

The taxpayer contended that the penalty assessments involved charges of a 'criminal offence' for the purposes of the European Convention on Human Rights, and that his right to a fair trial had been infringed by a breach of the presumption of innocence and/or the unreasonable delay in bringing the interest and penalty assessments to a hearing; he also contended that the penalty was too high.

A problem for the taxpayer was that the Human Rights Act 1998 came into force on 1 October 2000 well after the events complained and, broadly speaking, the Act is not retrospective.

However, by sections 22(4) and 7(1)(b) of the 1998 Act, a person claiming that a public authority had acted in a way made unlawful by section 6(1) can rely on convention rights if he is a victim of the unlawful act.

Therefore, as the Crown had instigated the penalty proceedings, the Act was relevantly retrospective.

Mr Justice Jacob found that penalty appeal cases were criminal in nature.

In Georgiou v UK (2001) STC 80 the European Court of Human Rights held that a penalty assessment in respect of VAT and an appeal from it was a criminal matter.

The income tax system of penalties was designed to punish defaulting taxpayers.

The amount of fine was potentially substantial.

Therefore, the burden of proof was on the Crown.However, on the evidence, the assessments were entirely justified and there had been no breach of the taxpayer's human rights.

The Revenue had at all stages been required to prove the elements necessary to justify the relevant assessments, even if the evidential burden had occasionally shifted away from it and onto the taxpayer.The delay of five years that occurred in bringing the case (through no fault of the taxpayer) did not quite amount to a contravention of the requirement that an individual is entitled to a fair and public hearing 'within a reasonable time' - but it was very near the border of acceptability.

In future it was highly desirable that such appeals should be 'fast tracked'.

There was no basis for interfering with the amount of the penalty.

In Whittaker v Inland Revenue Commissioners (SPC NO.00272) (2001) the special commissioners dismissed the taxpayer's contention that it was inappropriate to raise a notice of determination until a dispute about the amount of inheritance tax due to the Italian authorities from the estate.

Any problem of double recovery could be rectified by making the necessary adjustments if any further tax was payable in Italy.The appellant's other contention that the notice of determination should be delayed because of an allegedly adverse exchange rate, was irrelevant.