Han (t/a Murdishaw Supper Bar) v Customs and Excise Commissioners: The Case of the Taxing Evasion Investigation

Han (t/a Murdishaw Supper Bar) v Customs and Excise Commissioners 

[2001] H.R.L.R. 54 Court of Appeal (Civil Division)

(July 3, 2001)

Brief Summary:

Following investigations by the Commissioners, assessments for under-declared Value Added Tax or Gaming Duty were issued against a number of different taxpayers. The same taxpayers were also assessed for penalties under either section 60(1) of the Value Added Tax Act 1994 (VATA) or section 8(1) of the Finance Act 1994 for tax evasion involving "dishonesty". The Court of Appeals affirmed the decision of the Value Added Tax and Duties Tribunal that the imposition by the Commissioners of civil penalties for the alleged dishonest evasion of tax pursuant to VATA section 60(1) gave rise to a "criminal charge" within the meaning of Article 6(1) of the ECHR.

The Facts:

The Respondents in this case are tax-payers who were charged fees by the Customs and Excise Commission for failure to pay adequate business taxes.  They were also charged penalties under VATA section 73(1) of and additional percentage of the unpaid taxes (50 percent for Respondent Morris, 90 percent for Respondents Han, Yau and Martins).  The three tax payers all ran their own small businesses - a Chinese food takeaway (Respondents Han and Yau), a fish and chip shop (Respondents Mr. and Mrs. Martins) and an off-premises bookmaker (Respondent Morris).  All Respondents  challenged the procedure by which they were assessed their fines under European Convention on Human Rights Article 6 (right to a fair trial) - particularly access to interpreters (for Respondents Han, Yau and Martins) and other procedural safeguards.

The Holding:

To determine whether VATA section 60(1) could be considered to include a "criminal charge," the Court of Appeals used the European Court of Human Rights' three-part test: (1) the domestic classification of the"offence", (2) the nature of the "offence", and (3) the nature and degree of severity of the potential and actual penalty.  The Court of Appeals agreed with the Tribunal that although the domestic proceedings in the present case were classified as civil rather than criminal, "the penalty was intended as a punishment to deter re-offending, its purpose was both deterrent and punitive" and the penalty itself was substantial. Accordingly, the penalty was a "criminal charge" under Article 6 of the European Convention on Human Rights. 

Villain?

The parties here were all accused of deliberate tax evasion but at two of them denied the charges.  In addition, all three attempted to some degree or another to work with Customs and Excise to lower their penalties.  They were also small business owners and not big, sophisticated companies.  Perhaps they were not completely innocent but I will consider them to not be villains.