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subbuteo player | accountingweb | Newcastle United: HMRC permitted to keep and share documents after criminal investigation dropped
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Tax case closed but HMRC allowed to keep documents

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HMRC has been permitted to keep and share documents after the criminal investigation into Newcastle United’s tax affairs was dropped.

15th Dec 2023
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At Leeds Crown Court on 20 April 2017, a hearing decided that it was reasonable to give Revenue officers access and search rights to St James’ Park, Newcastle. HMRC was in the course of a criminal investigation into Newcastle United’s tax affairs and, to help officers collect information in relation to the case, warrants were issued under Schedule 1 Police and Criminal Evidence Act (PACE) 1984.

Six days after the hearing, and only 12 days after 11 other men left Leeds and travelled to St James’ Park, HMRC executed the search warrants. And, just like the earlier Yorkshire visitors, they were given an unfriendly welcome but left with a very pleasing result.

Wealth of material 

The Revenue found things of value everywhere but the trophy room. There was so much material to review, HMRC used powers under ss 50 and 51 Criminal Justice and Police Act (CJPA) 2001 to seize hard copy and digital records wherever there were reasonable grounds for believing that the information might fall within the warrants.

On 17 January 2018, HMRC issued VAT assessments of just over £2m for the period from February 2011 to October 2016. 

Twelve days later the Revenue made a claim regarding Class 1 NIC for the tax years 2012/13 to 2017/18 of just over £4.25m (including interest) plus a £10,000 court fee and legal costs. Certainly a sizeable understated national insurance contribution (NIC) liability for a number of years containing so few win bonuses.

Both proceedings are stayed, presumably in part while agreement is reached over which documents can be used as evidence. 

Relevance review

In January 2019, the Crown Court (following a request from the football club) ordered HMRC to review the seized material under s53(3) CJPA to determine whether each document fell within the scope of the warrants. This “relevance review” took place between March 2019 and July 2020 with over 9,350 items in dispute.

On 6 May 2021, HMRC wrote to Newcastle United to confirm that the criminal investigation into their tax affairs was closed, but that the investigation still indicated “tax non-compliance of a serious nature” and that the eyes of civil law were still very much focused on them. The Revenue confirmed that “the matter will now be referred to colleagues elsewhere within the Fraud Investigation Service” and, further, that the related “appeals against the assessments to income tax, national insurance contributions and VAT [which] are currently stayed by the first tier tribunal” will also be “dealt with under the banner of civil investigation”.

Retention of digital copies

HMRC confirmed that they would return all hard copy material but would retain digital copies of material that was “potentially relevant to any tax irregularity and therefore the civil assessment and collection of tax” and share it with others within the Revenue responsible for any civil investigation (pursuant to s17 Commissioners for Revenue and Customs Act (CRCA) 2005). 

The Magpies appealed to the Crown Court arguing that as the case was over, all documents should be returned and, if not, the Revenue should spell out exactly which documents were being retained and why they felt they should be shared. The court agreed that HMRC should prepare and deliver a schedule identifying all the copies of documents that their criminal investigation team had determined should be shared with their civil investigation team. 

Copies of documents

Like most Newcastle fans, even in this moment of victory, the club still wasn’t happy. Firstly, it was discovered that, while HMRC had given back the originals, it had kept copies of large numbers of documents. Newcastle United argued that these were not within the remit of the initial warrant and, even if they were, copies of original documentation also had to be returned. Both courts have found this point easy to deal with. The relevant legislation in PACE states that “a constable may seize and retain anything for which a search has been authorised”. S21(5) gives a constable the right to “photograph or copy, or have photographed or copied, anything which he has power to seize without a request being made”. There can therefore be no question that the copies made were made with lawful power.

Secondly, Newcastle was keen to highlight that the copying process created new “property” that had been seized from the original owner. The judge proceeded on the basis that that conclusion did “not in fact take Newcastle United much further”. It was the Alan Pardew of legal issues.

Next, the club argued that HMRC should be able to only share “work product or work done on documents without including the documents themselves”. To help their case they presented an interpretation of the law that the judges referred to as “bizarre”. It was, said the court, ridiculous to accept their interpretation because it would “make any benefit or utility from the provisions unworkable. HMRC would… have the conclusion or supposition without the documents that supported it.”

Retention of evidence unfair

The case has now reached the High Court with Newcastle United still arguing that HMRC’s retention of the evidence that could, potentially, prove that the club has not paid the right amount of tax and NIC, is unfair. Their case is made up of the following points.

  1. Under s22 PACE, when a criminal investigation ends, HMRC is obliged to return or destroy all seized material including copies.
  2. The power to retain seized material is confined to such a period as is necessary in all of the circumstances for the purposes for which the property was seized with no subsequent rights to retain property for public purposes.
  3. S17 CRCA should not provide power to retain seized material that HMRC would otherwise be required to return. The power to share acquired information is power to share information only and not to acquire it. 
  4. When a criminal investigation is discontinued and the right of retention lapses under PACE, HMRC is not entitled by virtue of the s17 gateway to pass copies of those documents to the civil enforcement team of HMRC.

The High Court stated that s22 PACE does not require the return or permanent deletion by HMRC of copies and images of documents once a criminal investigation has concluded. Also, s22 is concerned with the seized originals and not with copies or images. It does not address other interests that may be protected by the law, for example, the confidentiality or privacy interests in the content of the information that is contained in documents. In any event, the words “so long as is necessary in all the circumstances” in the legislation include the case where HMRC seeks to retain the copies and images for public (but non-criminal investigation) purposes. These include the purpose of the collection of taxes. 

The High Court judge noted that s17 is not a power of retention; it is a power to share that which HMRC is entitled to retain. Acquired information can only be shared if there is a right of retention. As such, s22 PACE was the relevant legislation and the right to retain had already been decided earlier in the case.

HMRC was therefore right to retain the documents if it felt it was in the public interest to do so.

Newcastle United seem incredibly keen to ensure information relating to how much they have paid people, via whom the money was paid and where the money was paid is shared with as few people as possible. For legal reasons, I’d like to be clear I’ve no idea why that would be.

Change of ownership

Of course, the ownership has changed at Newcastle United since the years in question. Perhaps the new owners will bring an era to the club where all payments are above board, open and justifiable with no concerns raised by the government or the footballing authorities. It is noteworthy that the new owners have continued to pursue this case through the courts. They are clearly people who believe in the right to a fair trial.

As far as this case is concerned, Newcastle United will have to proceed knowing that various parts of the Revenue know a lot about them for the period April 2012 to April 2018. During that period they played Sunderland eight times. They failed to win any of the eight matches, losing six in a row. This isn’t relevant to the case, I just like saying it.

Replies (5)

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Ivor Windybottom
By Ivor Windybottom
15th Dec 2023 10:38

Giles, what a great article... made me laugh.
Thank you!

Thanks (2)
avatar
By FactChecker
15th Dec 2023 15:50

You *really* don't like Newcastle, do you?
[I'd guessed your Mak'em allegiance before the article's punchline.]

Thanks (3)
Replying to FactChecker:
paddle steamer
By DJKL
18th Dec 2023 18:17

You don't have to be from Sunderland to not like Newcastle, any club owner getting into bed with Glasgow Rangers, notwithstanding how poor the loan players turned out to be, and despite the fall out afterwards from the relationship (lots of solicitors) , is not to be trusted, it may have been under a previous Newcastle owner but taint carries. (Not overly keen on the current Newcastle owners but at least they do not appear to have any Old Firm connections, in fact they really might be a good fit with Dundee United if they want a Scottish club)

Thanks (0)
RLI
By lionofludesch
16th Dec 2023 13:45

Very entertaining.

But black shorts surely......

http://www.historicalkits.co.uk/Newcastle_United/Newcastle_United.htm

Thanks (0)
Replying to lionofludesch:
Pile of Stones
By Beach Accountancy
18th Dec 2023 14:13

The decline of western civilisation through sponsorship:

Brewery
Telecoms
Building Society
Building Society
Bank
Money Lending
Online Betting

Thanks (1)