R v Allen

The House of Lords dismissed the appellant's appeal against convictions for cheating the public revenue. The court rejected the contention based on section 739(2) of the Income and Corporation Taxes Act 1988 that deeming income to be the appellant's income operated to render the offshore companies not liable to corporation tax and so negated any loss to the revenue. The court also held that under sections 167 and 168 of the Income and Corporation Taxes Act 1988 a person who is a "shadow director" can be treated as a director for the purposes of Chapters I and II of Part V so that living accommodation and benefits in kind provided by the company may be taxed as emoluments under Schedule E (sections 145 and 154). Finally, the court rejected the argument that the use of a schedule of assets procured after a section 20 Taxes Management Act 1970 notice and the Hansard procedure breached the appellant's right not to self-incriminate under article 6 of the European Convention, distinguishing authorities on compelled statements because the appellant had provided false information and the Human Rights Act 1998 did not operate retrospectively to render previously safe convictions unsafe.

Background and parties: The appellant, Brian Roger Allen, was convicted at the Crown Court of multiple counts of cheating the public revenue (corporation tax and income tax) and was sentenced to concurrent seven year terms of imprisonment; a confiscation order under section 71 of the Criminal Justice Act 1988 was made. He appealed to the Court of Appeal which dismissed the appeal, and then to the House of Lords. The appeals raised issues of statutory construction in tax law and of the protection against self-incrimination.

Nature of the appeal and relief sought: The appellant sought to overturn his convictions. Grounds included (i) that section 739(2) Income and Corporation Taxes Act 1988 operated to deem offshore company income to be his so that the companies could not have suffered a taxable loss, (ii) that as a "shadow director" he was not within the charge to tax under sections 145 and 154 and Schedule E, and (iii) that his conviction based on a schedule of assets obtained after a section 20 Taxes Management Act 1970 notice and the Hansard procedure violated article 6 ECHR (self-incrimination), with reliance also placed on the Human Rights Act 1998.

Issues framed by the court:

• whether section 739(2) ICTA 1988 has the additional effects asserted by the appellant in relation to corporate and foreign persons' income;
• whether sections 145 and/or 154 ICTA 1988 impose a charge to tax under Schedule E in respect of benefits received by a person who is a shadow director within the extended meaning in section 168(8);
• whether the obtaining and use of the schedule of assets following a section 20 TMA 1970 notice and the Hansard procedure breached article 6 by compelling the appellant to incriminate himself, and whether the Human Rights Act 1998 operated to render the conviction unsafe.

Reasoning and conclusion: The House rejected the section 739(2) point (for reasons given and by reference to the companion Dimsey appeal). On the shadow director point the Lords held that Parliament intended the concluding words of section 168(8) to treat a person in accordance with whose directions the directors act as a director for the purposes of Chapter II, and that the statutory scheme (including sections 167(1), 168(2), 145 and 154 and Schedule E) applies so as to tax accommodation and benefits provided to such a person as emoluments, with paragraph 1 of Schedule E supplying the necessary territorial limitation. On the self-incrimination point the court distinguished Strasbourg authorities relied upon by the appellant because the state is entitled to require tax information and the appellant, having been induced to provide information by the Hansard procedure, did not give true information but false schedules; further, statutory provisions (section 105 TMA 1970 and PACE section 76(4)) and the decision in R v Lambert as to non-retrospectivity of the Human Rights Act meant the article 6 argument failed. The House dismissed the appeal and affirmed the safety of the convictions.

Appeal dismissed. The House rejected the section 739(2) point, held that a shadow director is to be treated as a director for the purposes of Chapters I and II of Part V of the Income and Corporation Taxes Act 1988 so that benefits and accommodation provided by the company may be charged as emoluments under Schedule E (thus upholding convictions on the relevant counts), and rejected the article 6 self-incrimination challenge to the use of a schedule obtained after a section 20 Taxes Management Act 1970 notice and Hansard procedure because the appellant provided false information and the Human Rights Act 1998 did not render the conviction unsafe.

Convicted at the Crown Court at Knightsbridge (19-20 February 1998) and sentenced; confiscation ordered under section 71 Criminal Justice Act 1988. Appeal to the Court of Appeal (Criminal Division) dismissed and convictions affirmed (reported at [2000] QB 744). Appeal to the House of Lords dismissed ([2001] UKHL 45).