TTOG11120 - Civil Investigation of Fraud (Code 9): historical record: general: impact of the Human Rights Act 1998 on civil procedures for dealing with fraud

In deciding the application of the Human Rights Act 1998 to civil procedures for dealing with fraud cases, the Courts have taken a consistent view in terms of the range of available penalties for both direct and indirect taxes.

In the case of Commissioners of Customs and Excise v Han and another and other appeals [2001] STC 1188 the Court of Appeal held that the Customs civil penalty for fraud and the Inland Revenue “Hansard” procedure for investigating alleged fraud with the view to imposition of a civil penalty were criminal proceedings for the purposes of Article 6 of the European Convention of Human Rights, not withstanding that both were civil proceedings in UK law.

In simple terms the taxpayer is entitled to the safeguards of Article 6: Right to a Fair Trial, in any investigation carried out with a view to imposing civil penalties for fraudulent conduct. This has a number of significant implications for the operation of this procedure. Safeguards are inherent within this procedure to ensure compliance with the Human Rights Act. Any specific safeguards will be explained within the parts of the guidance relevant to the particular aspect of the procedures to which the safeguard applies.

As part of the Court of Appeal’s scrutiny of the Hansard procedure in R v Gill and Gill [2003] STC 1229, they determined that as prosecution for any evasion of tax had not been ruled out by the investigators, they were charged with the duty of investigating offences within the terms of section 67(9) of the Police and Criminal Evidence Act 1984 (PACE). As such the protections of PACE Code C should apply to such investigations.

The same issue was considered by the High Court in relation to former Customs’ procedures in the case of Khan v Commissioners of Customs and Excise [2005] STC 1271. In this instance it was held that as the appellant was told at interview that the matter was not being investigated with a view to prosecution, the situation was distinguishable from that which obtained in Gill. The officers conducting the interview were not “charged with a duty of investigating [criminal] offences” and, therefore, the safeguards of PACE Code C do not apply.

A key feature of Civil Investigation of Fraud is that once a decision has been made to follow a civil route for investigation and the procedure is offered to the taxpayer, HMRC retains no underlying threat of prosecution for the original tax loss. As a result the provisions of PACE Code C will not be applied to the conduct of these procedures and this action is consistent with the ruling in Gill.