Taxation

Value added tax - statutory penalties giving rise to 'criminal charges' - taxpayers entitled to minimum convention rights pertaining to criminal charges Han & Yau v Customs and Excise Commissioners; Martins & Martins v Same; Morris v Same: CA (Lords Justice Potter and Mance and Sir Martin Nourse):3 July 2001The VAT and duties tribunal, on a preliminary issue, decided that penalties for alleged dishonest evasion of VAT imposed under section 60(1) of the Value Added Tax Act 1994 and section 8(1) of the Finance Act 1994 gave rise to 'criminal charges' within the meaning of article 6(1) of the Convention for the Protection of Human Rights, as scheduled to the Human Rights Act 1998.

The commissioners appealed.Kenneth Parker QC and Timothy Ward (instructed by the Solicitor, Customs and Excise) for the commissioners.

Eleanor Sharpston QC and Andrew Young (instructed by Penningtons) for the taxpayers.

Held, dismissing the appeal (Sir Martin Nourse dissenting), that the classification of the penalties provided for as 'civil' was no more than the starting point where the levying and enforcement of the penalty concerned was designed to punish and deter members of the public at large in respect of dishonest conduct; that the nature of the offence which attracted the application of civil penalties was dishonest conduct in respect of the tax payable, and the commissioners enjoyed a discretion as to whether to apply a civil penalty or to prosecute; that it was not necessary, for the purposes of a 'criminal' charge, to show that the penalty for alleged tax evasion involved imprisonment, merely that it was substantial and its purpose was punitive and deterrent; and that, since those requirements had been made out, the taxpayers were therefore entitled to the minimum rights provided for in article 6(3) of the convention.