Calamitous consequence of a failure to notify HMRC

Should one feel sorry for Gareth Edward Steed?

Mr Steed engaged in what the Crown Court judge described as "moonlighting" - legitimate trading which he failed to declare for tax.  Indeed it seems he was not on HMRC's 'radar' at all.  He received no tax returns and he failed to notify HMRC of his chargeability to tax.

It seems that he was a 'grafter' prepared to do anything legitimate to make money - whether that involved buying and selling second hand cars, undertaking building work, or whatever.  Perhaps he also was engaged in some rather less legitimate 'business' too.

But somehow he was 'rumbled'.  Ultimately he was charged with three counts of tax evasion.  As often happens in criminal cases there were clearly some sort of discussions between the two sides before the matter came to court.  As a result the original three charges were dropped and one new charge was introduced - to which Mr Steed pleaded guilty.

The charge was one of common-law 'cheat' in that between 1 April 2003 and 31 December 2004 Mr Steed failed "to submit declarations of tax due including the proceeds derived from the sale of vehicles, furniture and tools together with that from building work".

Mr Steed accepted that, as a result, a tax liability of at least £3,558 had arisen for 2002/03 which had escaped self-assessment.

But that was not the end of Mr Steed's troubles because, following his conviction for 'cheat' HMRC pursued confiscation proceedings.

They argued that he had a 'criminal lifestyle' for confiscation purposes on the basis that he had committed an offence over at least 6 months from which he had gained a benefit of at least £5,000 (s75 PoCA 2002).  In that connection HMRC pointed out that had a tax return been submitted for 2002/03 it would have triggered not only payment of £3,558 for 2002/03 but also a payment on account for the following year.  In consequence the amount involved exceeded £5,000.

The Crown Court judge agreed.  Applying the 'criminal lifestyle' assumptions the judge found that Mr Steed was unable to produce evidence to rebut the statutory assumptions that amounts expended by him and assets held by him had been obtained in consequence of unspecified general criminal conduct on his part.  He made a confiscation order against Mr Steed for £707,200 (with a four year prison sentence in default of payment by the due date).

That sum was Mr Steed's 'available amount', which is normally calculated to be the value of the defendant's gross assets less any liabilities secured on them (such as mortgages).

The Crown Court judge also formed the view that Mr Steed had probably been engaged in other criminal activity too.  He said, "It may be that the defendant . . . would not be convicted on the criminal standard of all the matters to which I have referred. It is a question of viewing an overall picture and the conclusion I come to is that the overall picture supports the contention that it is more likely than not that he was involved in criminal conduct over and above the Count to which he pleaded guilty".  He referred to "money-laundering, drug-dealing, the possession of goods bearing false trademarks with a view to sale, the evasion of duty and benefit fraud".

Mr Steed appealed.  The Court of Appeal in a decision published on 1 February upheld the confiscation order and dismissed the appeal - Steed v R [2011] EWCA Crim 75.

In particular the Court of Appeal recognised that the proceeds derived from legitimate trading (such as sales of used cars) were not themselves benefits of criminal conduct.  Rather the benefit consists of the tax evaded. 

The Court of Appeal accepted that "where a trader evades tax and proves, on the balance of probabilities, that his assets and expenditure derived from legitimate trading on which he paid no tax then the trader will have rebutted the statutory assumptions".  In that event the only benefit remaining for confiscation would be an amount equal to the tax evaded.

But crucially it also noted that the Crown Court judge had found that "the appellant was unable to establish on the balance of probability the extent to which the sources of his assets and expenditure were legitimate and the extent to which they were illegitimate. Since he was unable to prove what proportion was legitimate the consequence was that in relation to any given asset or item of expenditure he could not prove that the property was not held by him as a result of his general criminal conduct".

It followed that he was unable to rebut the statutory assumptions in relation to monies he had expended and assets which he held.

So the financial consequences of Mr Steed's failure to notify chargeability to tax have been rather more serious than he may have anticipated - almost 200 times more serious!

David

Comments
cymraeg_draig's picture

Misrepresentation

cymraeg_draig | | Permalink

"In that connection HMRC pointed out that had a tax return been submitted for 2002/03 it would have triggered not only payment of £3,558 for 2002/03 but also a payment on account for the following year.  In consequence the amount involved exceeded £5,000."

 

That is stretching the facts even by HMRC's low standards.  A "payment on account" is NOT a liability - it is merely as "estimate". Had he in fact made a loss for that year the paym,ent on account if paid could have become reclaimable.

 

Yet another example of the muppets at HMRC misusing legislation to hammer the little man whilst leaving the real criminals alone.  This law needs scrapping - and fast.

davidwinch's picture

The payment on account

davidwinch | | Permalink

C_D

The Court of Appeal looked at this.  Their view was that the tax return (had one been submitted) did create a liability to make a payment on account of the following year.  That liability might evaporate on submission of a tax return for the following year but that did not mean the liability to pay had not existed.

The judgment reads:

"The appellant contends that the liability in respect of the tax year ended 5 April 2004 was only a provisional liability. That is wrong. The liability imposed by s.59(A) [Taxes Management Act 1970] was an existing liability subject to the claims and adjustments for which s.59(A) provides (see e.g., s.59(A)(9)). Accordingly, the amount of benefit exceeded the statutory minimum of £5,000 and the condition in s.75(4) [Proceeds of Crime Act 2002] was satisfied."

David

Old Greying Accountant's picture

What sticks in the craw...

Old Greying Acc... | | Permalink

... is that this poor sod worked hard for precious little and probably cost the state peanuts, even if he did not contribute, whilst other agencies of the state throw obscene amounts at malingering good for nothing scroungers who have never (or ever intend to) done a days work in their life!

 

 

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

The way this sledgehammer is being used to crack nuts is an appalling abuse of parliaments stated intentions.

For the management at HMRC to pursue others when they themselves have now been shown to have acted corruptly by deliberately hiding their incompetence in order to qualify for bonuses etc is astounding hypocrisy.

The court has done its reputation no good with this contrived judgement and justice has certainly not been served,  One can only hope that their decision will be appealed as far, if necessary, as the european court.  The behaviour of the court in this judgement is reminescent of the kangaroo courts of the soviet communist regime or the puppet courts of Iran.  

cymraeg_draig's picture

malingering good for nothing scroungers

cymraeg_draig | | Permalink

the state throw obscene amounts at malingering good for nothing scroungers who have never (or ever intend to) done a days work in their life!

Posted by Old Greying Acc... on Tue, 01/02/2011 - 23:05

 

 

That's no way to describe MPs and senior HMRC management - even if it is true.

 

 

 

ShirleyM's picture

2 sides to the story

ShirleyM | | Permalink

While I have sympathy for anyone who receives punishment out of all proportion, one has to consider where he got the money to buy his house? Could it be that his gains from undeclared earnings were far in excess of that published?

If he purchased the house from legitimate income why wasn't he able to prove this?

We do not have all the facts, and there is probably much more evidence than has been made public.

I, for one, believe that if he was drug dealing, and other immoral trading, then he got off very lightly!

nogammonsinanundoubledgame's picture

A bit unlucky with the choice of year?

nogammonsinanun... | | Permalink

Presumably had the conviction related to one year earlier it would have predated POCA???

As to the question of fairness, there has always been a tension between "punishment" and "deterrence" in sentencing.  Two extreme examples are often cited:  If you impose a £1m fine for parking on a yellow line, it will act as an effective deterrant, but as a punishment for a particular offense it is disproportionate.  At the other extreme, if you execute a terrorist it might in some eyes be viewed as a proportionate punishment but it acts as no deterrent whatsoever.  I never thought to see a real life example of the first extreme, until the POCA started to bite.

While I might feel sympathy for Mr Steed I feel at least as much sympathy for that poor bloke who got done for VAT evasion only for it subsequently to come to light that he was in fact owed a VAT refund but because of the conviction and freezing of his assets could not go ahead to clear his name.  I forget the link, sorry.

With kind regards

Clint Westwood

cymraeg_draig's picture

Justice ? What justice?

cymraeg_draig | | Permalink

As to the question of fairness, there has always been a tension between "punishment" and "deterrence" in sentencing.   Posted by nogammonsinanun... on Wed, 02/02/2011 - 09:02

 

To have a deterrant effect the law must first be respected - and the current state of justice certainly does not deserve respect.  It is becoming increasingly clear that we have a two tier justice system - take a few pounds from "the state" and you are destroyed,   -   but go out and attack, rape, and kill each other and the "state" hardly blinks an eye.

The recent case in the Lake District where families of the victims of Derrick Bird were paid £13,000 each from the Criminal Injuries Compensation Board, but one family had the payount halved because their son had a criminal conviction for dropping litter 20 years ago.   What a disgusting despicable and insulting ruling that was.

Even those working within the legal system no longer have respect for it, and the judiciary are losing their independence and becoming political puppets, denied the freedom to administer justice, and increasingly tied by ridgid sentencing "guidelines" which often defy logic.

Statistics show that if you refuse to pay your council tax you have a 54% chance of receiving a custodial sentence.  However, if you burgle a house your chances of receiving a custodial sentence are only 1%.  Says it all really doesnt it.

 

 

 

 

 

davidwinch's picture

A bit unlucky?

davidwinch | | Permalink

Clint

You have a point.  PoCA 2002 introduced new confiscation rules which came into effect in March 2003.  Under the previous confiscation rules (Criminal Justice Act 1988, as amended by Proceeds of Crime Act 1995) he would not have had a 'criminal lifestyle' unless he had been convicted of at least two offences from which he had benefited (s72AA(1)(c)).  Mr Steed was only convicted of one offence.

However the prosecutor could instead have charged him with, for example, offences under s144 Finance Act 2000 in respect perhaps of each of the tax years 2002/03 and 2003/04.  Under the PoCA 2002 rules that would not (in my view at least) produce a 'criminal lifestyle' (as neither of the offences would be an offence continuing for at least 6 months) but under the previous rules (had they been applicable at the time) it would satisfy the test (being two convictions).

My thinking is that possibly the prosecutor framed the wording of the offence with the 'criminal lifestyle' criteria in mind so that he knew that Mr Steed would be subject to the statutory assumptions in confiscation.

Prosecutors are alive to these considerations!

David

julian.sims's picture

Prosecutors aware and case presentation

julian.sims | | Permalink

David

I am interested in your comment that prosecutors are aware of these issues when framing charges etc.  In your experience, is the same consideration given by the defence to possible confiscation proceedings in what might be considered lower value cases.  It seems confiscation proceedings are becoming much more routine now.

It strikes me (knowing we only have limited information) that this case highlights the importance of following all the implications through in this (or any) tax case and preparing case to allow for these.  The judgement (para 23)highlights that the accountants evidence about the legitimate income was rejected by the judge, but does not indicate why.  I wonder what could be learnt about presenting such evidence in these cases from the judge's reasoning when rejecting the GT evidence.

I cannot see anything within the judgement to show whether a Financial Reporting Order was made or not.  It seems the type of case where one could be appropriate.

Julian Sims

davidwinch's picture

Case presentation & FRO

davidwinch | | Permalink

Julian

I do not interpret the judge's comments as any criticism of Grant Thornton.  I would expect that the judge was simply not satisfied that there was sufficient clear and cogent evidence to show that, for example, a particular expenditure was funded by proceeds of legitimate trading activity.

My guess would be that the defendant did not keep the sort of accounting records which one would ordinarily wish a self-employed businessman to keep to show and record his receipts and payments.  Without a half-decent cash book the accountants would be struggling to match up specific items of expenditure with legitimate income.

The Court of Appeal judgment says "the appellant was unable to establish on the balance of probability the extent to which the sources of his assets and expenditure were legitimate and the extent to which they were illegitimate. Since he was unable to prove what proportion was legitimate the consequence was that in relation to any given asset or item of expenditure he could not prove that the property was not held by him as a result of his general criminal conduct".  That is the crux of it.

A similar comment was made over 10 years earlier in the case of R v Thorley [2000] EWCA Crim 3547, although it is arguable in that case that the lawyers did not properly understand how a self-employed sole trader's business operates.

As for a Financial Reporting Order we simply do not know if an order was made in Mr Steed's case.  I agree that it was a possibility.

David

julian.sims's picture

Accounting records and evidence

julian.sims | | Permalink

David

You make a very good point about likely lack of useful accounting records and I agree that the accountants were probably struggling from the start to provide sufficient evidence even on balance of probabilities.

Given the likely records in any case such as this, the case is probably of wide relevance to anyone involved in unregistered/returned trading.

Julian

"I, for one, believe that if he was drug dealing, and other immo

chatman | | Permalink

What is immoral about drug dealing? And what do you mean by "drug"? Do you mean cigarettes? Alcohol? Coffee? Chocolate?

In any case, he wasn't even convicted of drug dealing, so why are we condmening the poor guy for it?

could have been worse

The Black Knight | | Permalink

He might have appointed an accountant, that failed to notice some of the dealings the Judge appeared to have knowledge or suspicion of,

then he might have had company in his cell.

cymraeg_draig's picture

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cymraeg_draig | | Permalink

Where he went wrong was in trying to earn a living.  I'm dealing with a case at present where the tax office kept sending demands and threats and the client ignored them. I'm really not surprised as one of the first things I discovered when approached about this case was that the client cannot read or write. 

Guess what? Those nice understanding people at HMRC have written (their first mistake) that they dont consider that to be an excuse as their letters made it clear that Mr.*******  must contact them immediately.

I wonder what part of "he cant read or write" the muppets at HMRC dont understand?  All I can conclude is that although he cant read or write he is far brighter than the idiot who wrote that letter.

 

Caber Feidh's picture

Illiteracy is no excuse

Caber Feidh | | Permalink

It does seem reasonable for HMRC to assume that everyone in the UK can either read and write or has access to someone who can. If not, what does an illiterate do with bills for rent, council tax, gas, electricity etc?

If C_D wrote to HMRC on his illiterate client's behalf then said client clearly had contact with someone who could read and write, and would answer on his behalf. HMRC can hardly be expected to send a member of staff to speak to anyone who does not answer their mail on the off-chance they are illiterate.

Gerard Murray's picture

The Lessons of Mr Steed

Gerard Murray | | Permalink

The case of the moonlighter and grafter, Garret Edward Steed and his jousts with HMRC as outlined in Steed [2011] EWCA Crim 75 open a proverbial hornets’ nest both in relation to dealings with HMRC and the wider picture of criminal confiscation under PoCA 2002.  On the face of it, the the underpaid liability of £3,558 for the tax year 2002/03 appears to ensure that Mr Steed’s criminal benefit is under the threshold of £5,000 to enable him to escape from any confiscation proceedings. But with one leap the Revenue freed themselves from such shackles by making the case, that the Court of Appeal accepted, that the liability triggered a payment on account of a similar amount for 2003/04, even the half of which payable on 31 January 2004 pushed his figure of criminal benefit over the £5,000 threshold.

To practitioners, it appears that the Revenue have been really pushing out the boat in their efforts to get Mr Steed and the case appears to have similarities to   Shabir EWCA/Crim/2008/1809. In this case,at paragraph 17 Lord Justice Moses stated ‘The appellant contends that the liability in respect of the tax year ended 5 April 2004 was only a provisional liability. That is wrong. The liability imposed by s.59(A) was an existing liability subject to the claims and adjustments for which s.59(A) provides (see e.g., s.59(A)(9)). Accordingly, the amount of benefit exceeded the statutory minimum of £5,000 and the condition in s.75(4) was satisfied.’ Let me take an example of a taxpayer who declares that his income for the for 2003/04 was less than that for 2002/03 and applies to have his payments on account for 2003/04 reduced by more than £5,000 below his liability for 2002/03 and yet whenever his 2003/04 return is completed it is found that his eventual liability is just more than £5,000 more than his 2002/03 liability. Does he run the wrath of potential criminal confiscation under PoCA?

The second set of issues raised are more pertinent to the accountancy profession which does not want to be the meat in the sandwich of confiscation cases. In previous issue of Accounting Evidence, David Winchhas  rightly drawn the attention of Expert Witness accountants to the salutary verdict in Munir [2008] EWCA Crim 3110, a case in which Mr Munir was convicted of cheating Her Majesty's Revenue & Customs of approximately £6.5 million.

The Court of Appeal stated the following: ‘An accountant is expected, when assisting this court in a matter of this kind to help the court and bring to bear as a professional man his experience and expertise. We would expect an accountant, first of all, in a case where a defendant had said one thing to the jury and was now putting forward a different account, as set out in the accountant's reports, to draw to the court's attention that in cases of this kind there must be banking evidence. There must be documentation and to weigh up in an honest and proper manner the value of anything put forward because, as we have endeavoured to explain, the trick of transferring sums in cash is a well established means of breaking the chain of money transfers. But monies can only be paid into accounts where above certain amounts with an explanation, and in all cases can only be paid into accounts by evidence of documentation. That is something that, first of all, we think should have been pointed out. Secondly, and we have already referred to this, we are surprised that the report was put forward when, as it was, when it was known the defendant was not going to give evidence. Thirdly, it is what we have described as castles in the air.’ The judges considered reporting the accountant for discipline before the ICAEW. After Munir all accountants should have been put of clear notice as to the views of the judiciary.

Just in case there has been any misunderstanding the words of the Court of Appeal in Jones   [2006] EWCA Crim 933 should be of warning. At paragraph 20 the Court of Appeal, as quoted in Steed said ‘Mr Sinclair (counsel for David Lee Jones) makes the point that it is perfectly possible for a business as a whole to be a legitimate business, even though, illegitimately, tax on any profits and any VAT due is not paid. But the fact remains that if persons such as this appellant in this particular business choose to operate their business dealings in such a way as to deal only in cash and to keep no records of any kind whatsoever they have to take the consequences that may arise: not least for the purposes of the potential application of the Proceeds of Crime Act 2002. These considerations were clearly, in our judgment, relevant to the judge's conclusion on this particular point and simply went to show that in documentary terms the appellant was in no position to discharge the burden on him for the purposes of section 10(6). It was also relevant to the question of whether or not there was a serious risk of injustice if the statutory assumptions were made.’ Most moonlighting cases that accountants are called upon to act to reslove tax issues in involve a paucity of financial records.

Given such words both the unfortunate Mr Steed and more importantly his accountants were in something of a pickle.

A number of lessons seem to be emerging from the plethora of cases now being taken under the confiscation proceedings by an increasing number of agencies:

1)     Defendants and their accounting and legal advisers should be on notice that cases which previously would have been heard in the lower courts and subject to a fine are increasingly being brought by the Crown to Crown Court and that confiscation proceedings will follow upon either a guilty plea or being found guilty. The temptation is to accept the guilty plea for a reduction in the number of charges without realising that confiscation proceedings will still follow.

2)     That the number of agencies adopting PoCA criminal confiscation powers is steadily growing and that very often the defendant business or its lawyers may be tardy (or just too late) in taking expert advice from forensic accountants who have experience of such cases.

3)     The legislation is draconian and the courts increasingly feel that their hands are tied.  

 

 

cymraeg_draig's picture

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cymraeg_draig | | Permalink

It does seem reasonable for HMRC to assume that everyone in the UK can either read and write or has access to someone who can. If not, what does an illiterate do with bills for rent, council tax, gas, electricity etc?

Posted by mrbdunsmore on Wed, 02/02/2011 - 18:25

 

I totally disagree. Have you any idea how many illiterate people there are in the UK?

And you are totally missing the point. OK HMRC did not know he was unable to read (and had no one to read it for him until we were approached by a neigbour who discovered the situation).  The point is that AFTER being informed that he could not read their letters they then wrote saying that he should have contacted them because they had WRITTEN asking him to do so.  That "logic" by a numbskull at HMRC beggers belief and shows the utter ignorance of some of the people employed by HMRC.

HMRC were informed that we had just become involved, and were made fully aware that no one had read the letters they had senmt (or indeed opened the envelopes) until we were engaged.

At one time HMRC employed intelligent officers who, in the main, were simply concerned with properly and reasonably collecting taxes due.  Now they employ many semi literate thugs who seem to get their kicks by throwing their weight around and harassing taxpayers with ridiculous demands. Indeed many of them would be better suited to wheel clamping as that is their mentality. 

 

cymraeg_draig's picture

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cymraeg_draig | | Permalink

It does seem reasonable for HMRC to assume that everyone in the UK can either read and write or has access to someone who can. If not, what does an illiterate do with bills for rent, council tax, gas, electricity etc?

Posted by mrbdunsmore on Wed, 02/02/2011 - 18:25

 

I totally disagree. Have you any idea how many illiterate people there are in the UK?

And you are totally missing the point. OK HMRC did not know he was unable to read (and had no one to read it for him until we were approached by a neigbour who discovered the situation).  The point is that AFTER being informed that he could not read their letters they then wrote saying that he should have contacted them because they had WRITTEN asking him to do so.  That "logic" by a numbskull at HMRC beggers belief and shows the utter ignorance of some of the people employed by HMRC.

HMRC were informed that we had just become involved, and were made fully aware that no one had read the letters they had sent (or indeed opened the envelopes) until we were engaged.

At one time HMRC employed intelligent officers who, in the main, were simply concerned with properly and reasonably collecting taxes due.  Now they employ many semi literate thugs who seem to get their kicks by throwing their weight around and harassing taxpayers with ridiculous demands. Indeed many of them would be better suited to wheel clamping as that is their mentality. 

 

HMRC staff "seem to get their kicks by throwing their weight aro

chatman | | Permalink

To be fair, whilst this may be true of some, I would imagine most are motivated by their bonus payments for getting more revenue in.

 

Publicus's picture

Confiscation Powers

Publicus | | Permalink

It appears to me that some of our commentators are wrong in seeking to lay the blame at the feet if the officials of the various agencies that have embraced PoCA on their dealings with individuals and business alike. The real fault lies with Parliament that passed the legislation without being remotely aware of it's consequences.

davidwinch's picture

An approach to 'fairness'

davidwinch | | Permalink

One approach to the objective that HMRC has of being fair, and being seen to be fair, to different taxpayers is to treat each of them equally harshly.

So, it could be argued, that if every person convicted of tax fraud is pursued through confiscation to the full extent of the law - then that is 'fair'.

Of course there are other views . . .

David

Old Greying Accountant's picture

I have one word to say David

Old Greying Acc... | | Permalink

Vodafone!

Fairness?

stephengw | | Permalink

David - re your last comment. That might be true if the law itself could be seen to be fair. I think your example shows very clearly that it is not.

 

Gerard Murray's picture

Revenue and customs and PoCA 2002

Gerard Murray | | Permalink

There appears to some surprise in a number of previous threads that the Revenue is vigorously using PoCA 2002. I remember alarm bells ringing over six year ago when I read that in the case of Hill. EWCA Crim 3271 that Revenue and Prosecution Office was then clearly looking at cases where there was not just offences of tax evasion and cheating the Revenue but also money laundering offences.

 

Six years on one would have thought that the accounting and legal advisers to individuals and companies facing tax investigations would be aware of the possibility that their clients would be charged with offences under PoCA 2002 as well as the Taxes Acts

 

Proceeds of confiscation

jpcc1 | | Permalink

But who receives the proceeds of any confiscation? presumably the Crown? Is the victim re-imbursed for their loss?

julian.sims's picture

Revenue and customs and PoCA 2002

julian.sims | | Permalink

Gerard

If others are the same as me, it is not surprise that HMRC are using powers we should all have been aware of for a number of years, but rather that the examples and appeal cases are becoming more numerous.  Therefore increased comment.

I do feel that there are plenty of accountants (cannot speak about lawyers) who are struggling to adjust to a culture and set of rules which has changed fundamentally over the last fifteen or so years.

In dealing with Revenue Prosecutions Office and Offender Management Unit for Financial Reporting Orders we are not given the impression that their staff concerned are particularly experienced in handling the six monthly reports.  I do wonder a lot of the people both sides of the fence are learning as they go.  Is this a fair impression? I don't know.

Julian

davidwinch's picture

Confiscation and compensation

davidwinch | | Permalink

Following a criminal conviction a court can make a confiscation order, or a compensation order or both.

A confiscation order (typically) is made under Part 2 (in England & Wales) Proceeds of Crime Act 2002.  It is an order that the defendant pay a sum of money to the Crown.

A compensation order is made under s130 Powers of Criminal Courts (Sentencing) Act 2000. It is an order that the defendant pay a sum of money to the victim.

If the defendant cannot satisfy both orders the compensation order is paid in priority.

A compensation order can only relate to an amount arising from an offence of which the defendant is guilty (either from being found guilty or from pleading guilty or from asking the court to take into consideration on sentencing).

Magistrates can (currently) order compensation but not confiscation.

Let's take an example.  A defendant D works in a shop owned by V.  He is suspected of stealing shop takings.  The suspicion is that he has been stealing £100 per week since he commenced employment with V five years ago.

D has £1,000 in the bank and a house worth £150,000 with a £100,000 mortgage outstanding.

D is charged with theft of £26,000 over 5 years. He is to be tried in the Crown Court.  Prior to his trial an agreement is reached with the prosecution that D will plead guilty, but only to theft of £5,200 over one year.  He is duly convicted of that.

The judge can order both compensation and confiscation.

The compensation order cannot exceed £5,200 (the sum he has been convicted of stealing) and is payable to the victim, V.

The confiscation order cannot exceed D's available amount (D has a 'criminal lifestyle' because he has been convicted of an offence continuing over at least 6 months from which he has obtained at least £5,000) which is £51,000 (that is the £50,000 equity in his property plus the £1,000 in the bank) and is payable to the Crown.

If D cannot pay both then the Crown have to ensure that the compensation is paid in full before they can retain any monies they have obtained under the confiscation order.

I hope that explains the differences between confiscation and compensation.

David

Gerard Murray's picture

Revenue & Customs and PoCA 2002

Gerard Murray | | Permalink

Julian

The Stead case clearly indicates that HMRC have upped their game in using the full draconian powers contained in PoCA 2002 which surprises neither of us. I fully agree that not all accountants in practice are up to speed with the full implications of PoCA for their clients and likewise think tha there are major problems within some of the agencies that have been given PoCA powers.

The disturbing issues in the case of Mr Stead is how the Revenue used the payment on account for 2003/04 to bring the criminal benefit over the magical £5,000 figure and how the court of appeal agreed with them that this was entirely appropriate.  

More to be scorned than pitied

G A Lyon | | Permalink

I normally don't bother commenting as others would normally have made points on both sides of the arguement, but come on.....

Which of your client profiles does this guy fit into?

He has no regard for contributing to the society that he lives in but has managed to amass £700k of assets that they can find and attach. The Judge thought the accounting support for the case presented by a top CA firm was so poor that he levied the harshest punishment he could.

What has this got to do with HMRC acting unfairly towards your clients.

 

cymraeg_draig's picture

Disproportionate

cymraeg_draig | | Permalink

Which of your client profiles does this guy fit into?

He has no regard for contributing to the society that he lives in but has managed to amass £700k of assets that they can find and attach. The Judge thought the accounting support for the case presented by a top CA firm was so poor that he levied the harshest punishment he could.

What has this got to do with HMRC acting unfairly towards your clients.

 

Posted by G A Lyon on Fri, 04/02/2011 - 16:56

 

He was convicted of fiddling a miserable £5,000 in taxes. How in a just and reasonable world does that equate to him being robbed of £700,000 ?

Was the rest the "proceeds of a criminal lifestyle"?  Who knows.  He certainly hasnt been convicted of any further offences (as far as I know).  It was simply "assumed", and the last time I looked courts were supposed to deal with facts & proof - not speculation, assumption and guesswork.

Add to that the fact that certain rich individuals avoid £millions in tax every year by legalised fiddles, and the inequity of the way these orders are being abused becomes clear.

This is legalised theft - nothing less.  And it again shows that our courts and politicians are more bothered about money than they are about peoples lives - they disgust me.

 

 

 

Old Greying Accountant's picture

CD...

Old Greying Acc... | | Permalink

... superb point, excellently made.

And still "they" don't realise they are playing with matches in a firework factory. One stray spark and it won't be Egypt on the front page!

davidwinch's picture

When did you last look?

davidwinch | | Permalink

C_D

I see that you say "the last time I looked courts were supposed to deal with facts & proof - not speculation, assumption and guesswork" but the statutory assumptions used in this case - now in s10 Proceeds of Crime Act 2002 - first appeared in s2(2) Drug Trafficking Offences Act 1986.

At that time they applied only to persons convicted of a drug trafficking offence.  In 1995 they were extended to cover other criminal conduct by an amendment introduced into the Criminal Justice Act 1988 by s2 Proceeds of Crime Act 1995.

So for decades now courts have been confiscating based on assumptions.  That, of course, does not make it any less Draconian . . .

David

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

So for decades now courts have been confiscating based on assumptions.  That, of course, does not make it any less Draconian . . .

 

Posted by davidwinch on Sat, 05/02/2011 - 10:05

 

They have, but there's a big difference between a drug dealer (whose actions ultimately kill addicts) and someone who fiddles a few £pounds off the taxman.

I recall seeing some figures a couple of years ago which showed that those in court convicted of failure to pay council tax had something like an 80% chance of receiving a custodial sentence, yet those in court convicted of burglary had less that 10% chance of a custodial sentence.

The moral seems to be that you can steal from each other - but dont steal from "the state".

 

Old Greying Accountant's picture

CD

Old Greying Acc... | | Permalink

Whilst agreeing with your views that the justice sytem in this country is bankrupt, earlier in this thread you cited 54% and 1% as the chances of a custodial sentance for failure to pay council tax and burglary offences respectively, now you are saying 80% and 10%.

Even using tests of materiality, that is a big difference and the use of unsubstantiated statistics is how urban myths start: I now don't know if either or neither are correct, so I would ask that as this is a serious forum, and this thread deals with a serious issue, statistics should be used judiciously.

I did find this interesting forum, quite enlightening, makes you wonder why we bothered with the second world war!

http://www.sheffieldforum.co.uk/archive/index.php/t-301320.html

It would seem that imprisonment is only for refusal to pay, not inability to pay council tax though, a big difference.

 

 

Statistics !

ugdiv | | Permalink

You should all know that 30% of all statistics are made up!

<g>

cymraeg_draig's picture

.

cymraeg_draig | | Permalink

The first post I had the figures in front of me, the second I was working from memory.

The figures are not relevent - its what they demonstrate and the disparity that matters.

 

stepurhan's picture

Figures are relevant

stepurhan | | Permalink

I would say not only are the figures relevant, the source of them is also relevant. Otherwise we have no idea if the figures are reliable or what is being compared.

For example, it seems likely to me that someone being taken to court for council tax evasion is a last resort. Therefore receiving a custodial sentence becomes more likely because, in order to reach that stage, the person in question has had to exhaust all other alternatives. By contrast, court is presumably the first stop for someone accused of burglary and therefore the first opportunity to look at alternative deterrents. For a first offence, an alternative to a custodial sentence may be considered more likely to steer this individual away from becoming a hardened criminal. If the council tax figure is all "hardened" evaders and the burglary figure is all kids that made a stupid mistake and have been scared straight by going to court, that will skew the figures.

I'm perfectly prepared to be proved wrong about this, but I'd need something more than wildly varying percentages apparently pulled out of nowhere.

davidwinch's picture

Prosecution of Council Tax evaders

davidwinch | | Permalink

Stephen

I cannot give you statistics but I can speak from my own experience of such cases (a small and almost certainly unrepresentative sample of cases!).

In the cases of Council Tax Benefit evasion (or Council Tax Benefit fraud) in which I have been involved (all of which involved prosecution, usually in the Crown Court) the issues have not been limited to Council Tax Benefit.  The defendants have also been claimants of other benefits, typically Housing Benefit (also administered by the local authority) and Income Support or Incapacity Benefit (both of which are administered by the Department for Work and Pensions) or even Tax Credits (administered by HMRC).

The prosecution case has been that dishonest claims were made (or initially legitimate claims were dishonestly continued) for multiple benefits.

In particular a person eligible for Income Support will automatically be eligible on income grounds for Council Tax Benefit and Housing Benefit (if in rented accommodation).  If it subsequently transpires that the person was in fact not eligible for Income Support (for example because they had commenced to live with a domestic partner who was in full time employment) then immediately that person's eligibility for Council Tax Benefit and Housing Benefit is (at the least) thrown into question.

Such a case may be prosecuted jointly by the DWP and the local authority.

It is my experience that the DWP will prosecute cases involving relatively small amounts, whereas HMRC will happily settle much larger income tax / corporation tax evasion cases without prosecution.

In part that may be because a large scale tax evader is typically in a position to make a financial offer to settle (and to employ accountants experienced in reaching such settlements with HMRC).  A typical benefit fraudster is unlikely to be able to offer a significant lump sum to the DWP / local authority.

It is also typically the case that the suspect will attend a formal interview with the DWP under caution, without a solicitor or other professional adviser present, and will frankly admit dishonesty.  The suspect's frankness, rather than 'getting them off the hook', actually makes criminal prosecution much more straightforward as the DWP then no longer have to prove that the incorrect claim (or failure to notify a change of circumstances) was deliberate and dishonest.

It is only after such an interview that the DWP will take a decision whether or not to prosecute.

So there may be several factors at work which result in more prosecutions for benefit fraud than for certain other offences.

David

council tax statistics vs burglary convictions

goblinf | | Permalink

If council tax refusers are 54% convictions and burglars are 1% convictions - surely it's attributable mostly to the fact of how hard is it to find the perpetrator?

Council tax is linked to a property (in that it's a person at an address) and it's often a matter of public record who lives where.  So it's not that hard to find that person to get them to pay.

However, a burglar rarely leaves a business card and certainly doesn't have a public record available of his 'hitlist' of properties.

So, it takes more effort to find the burglar than the non-paying council tax person?

(sorry for going off-piste).

cymraeg_draig's picture

Is there a distinction between withholding money by deception an

cymraeg_draig | | Permalink

Leona Helmsley, the billionaire US hotel proprietor, once infamously said that “only little people pay taxes”. If she had ever lived in the UK, she might have added: “Only little people go to jail for tax fraud.”

Cheat the Government out of £20,000 in benefits and there is a very good chance that you will be put behind bars. Cheat the Government out of double that amount through tax evasion and there is a very good chance you will not.

In May 2010 Susanne Rees, of Bridgend in Wales, was sentenced to 60 days in prison after pleading guilty to defrauding her local council of £19,000 in housing and council tax benefit. Only three months earlier Michael Frost, a businessman from Cheltenham, avoided jail and was given only 60 hours of community service after pleading guilty to evading £65,000 of income tax through self-assessment fraud.

Probably the only reason Mr Frost escaped going to jail — despite cheating the Government out of more than three times as much as Ms Rees — was because he wore a smart suit and employed an even smarter lawyer.

A quick trawl through court records shows that defendants convicted of benefits fraud of more than £20,000 are often sent to prison, and sometimes a lot less.

Yet less than one in every 1,000 people subject to HM Revenue & Customs investigation for tax evasion is prosecuted to the degree that a criminal sentence even becomes a possibility. Far fewer end up in prison.

Patrick Malkinson, chairman of Boston United Football Club, avoided jail despite defrauding the taxman of almost £400,000. Had Mr Malkinson’s cleaner fraudulently claimed even a tenth as much in housing benefit, you can be sure that she would have ended up in prison.

Of course, the different sentences handed out for morally (or at least financially) equivalent crimes could, in part, be down to the record of the offenders. Some of the many benefit fraudsters put behind bars may have previous convictions, for example. But that cannot be the entire explanation.

It is common for wealthy businessmen caught up in tax investigations to do deals with HM Revenue & Customs. The taxman rarely starts a criminal prosecution when someone is prepared to co-operate.

With an estimated £1.1 billion in benefits going astray each year, and even more in tax still awaiting collection, we must consider carefully what, if any, distinction between withholding money by deception and obtaining money by deception.

Sentencing should be fair and proportionate, irrespective of your class, wealth or the cut of your suit, unfortunately in Britain it is not. 

 

Gwent CPS

JackHarper | | Permalink

were the prosecuting authority in Steed. Google them and you will find the BBC Report about Uncle Sarfraz Ibrahim and "Tariq" and "Nic Baker". Hope they are instituting confiscation proceedings against Sarfraz

Jack Harper

davidwinch's picture

Sarfraz Ibrahim

davidwinch | | Permalink

Jack

This is the link to which you refer Sarfraz Ibrahim - although I don't know how relevant the case is to Mr Steed.

As for confiscation proceedings against Mr Ibrahim I do not think he would be regarded as a person having a 'criminal lifestyle' since his offence did not meet any of the criteria of s75 PoCA 2002 (he would have done had his offence been committed over a period of at least 6 months).

David

Oh Joy!

JackHarper | | Permalink

So youou can be at it in No Trumps but for no more than about 5 months. Steed should have got everything into such a period. Case has no connection with Steed save for Bent CPS

and

spurs1952 | | Permalink

 to this list may I add the Royalty, Sarah Ferguson and the EU for starters.  

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