Key Facts
- •Mohammed Butt and Mahfooz Begum (Appellants) were issued tax assessments and penalty determinations by the National Crime Agency (NCA) under the Proceeds of Crime Act 2002 (POCA).
- •The NCA alleged that the Appellants' income and gains arose from criminal conduct, specifically money laundering, and that they had not declared this income.
- •The Appellants disputed the assessments, claiming their income was lawfully obtained from fashion and grocery businesses.
- •The assessments covered various tax years from 1996-97 to 2012-13 for Mr. Butt and 1998-99 to 2011-12 for Mrs. Begum.
- •The NCA relied on a witness statement from a SOCA financial investigator, bank statements, and other evidence to support its case.
- •The Tribunal heard evidence from the Appellants, the NCA officer who issued the assessments, and an accountant who prepared reports for the Appellants.
Legal Principles
Section 317 POCA allows the NCA to adopt HMRC's revenue functions if it has reasonable grounds to suspect income arises from criminal conduct.
Proceeds of Crime Act 2002, Section 317
The test for 'reasonable grounds to suspect' under s 317 POCA is both subjective and objective. The threshold is low; a prima facie case is not required.
O'Hara v Chief Constable of Royal Ulster Constabulary [1997] AC 286
Section 319 POCA states that the NCA does not need to identify the precise source of income when exercising its functions under Part 5.
Proceeds of Crime Act 2002, Section 319
Section 29 TMA allows for discovery assessments if the tax authority discovers a loss of tax, and this loss was brought about carelessly or deliberately.
Taxes Management Act 1970, Section 29
Section 34 TMA sets out a standard four-year time limit for making assessments, while Section 36 extends this limit for deliberate or careless actions.
Taxes Management Act 1970, Sections 34, 36
In discovery assessments, the burden of proof rests on the taxpayer to demonstrate the assessment is incorrect.
Burgess & Brimheath Developments Ltd v HMRC [2015] UKUT 578 (TCC)
'Deliberate' in relation to tax inaccuracies requires intentionality both in making the statement and in its inaccuracy.
HMRC v Tooth [2021] 1 WLR 2811
Schedule 24 to the Finance Act 2007 and Schedule 41 to the Finance Act 2008 outline the rules and penalties for inaccuracies in tax returns.
Finance Act 2007, Schedule 24; Finance Act 2008, Schedule 41
Outcomes
The appeals were dismissed.
The Tribunal found that the NCA had reasonable grounds to suspect that the Appellants' income arose from criminal conduct, the assessments were valid and made in time, and the penalties were appropriately calculated.