Regina v. Allen

A shadow director falls within the extended statutory meaning of “director” in the Income and Corporation Taxes Act 1988. Living accommodation and benefits in kind provided by the company are therefore taxable under Schedule E in the same way as benefits provided to an formally appointed director. The territorial limits in the Cases contained in Schedule E apply to that charge.

Article 6 does not prevent the state from requiring taxpayers, under proportionate financial penalties, to provide information needed to assess and collect tax. An inducement to make a full and truthful disclosure does not make a false return involuntary or prevent its use in a prosecution for the falsity itself.

The appellant was convicted of 13 counts of cheating the public revenue by concealing the profits of offshore companies, omitting benefits and income from tax returns, and submitting a false schedule of assets. The Court of Appeal dismissed his appeal and affirmed the convictions: [2000] QB 744.

The House considered whether section 739(2) of the Income and Corporation Taxes Act 1988 removed the offshore companies’ liability to corporation tax, and whether a shadow director was taxable under Schedule E on accommodation and benefits in kind. It also considered whether the use of the schedule of assets infringed the privilege against self-incrimination under article 6, although the conviction pre-dated the operative provisions of the Human Rights Act 1998.

1. Appeal dismissed unanimously. Lord Hutton delivered the leading speech. Lord Bingham, Lord Nicholls and Lord Steyn agreed with his reasons. Lord Scott agreed and also rejected the section 739(2) argument for the reasons given in his separate opinion in the related Dimsey appeal.

2. Per Lord Hutton, section 739(2) of the Income and Corporation Taxes Act 1988 did not have the additional effect contended for by the appellant. The statutory attribution of the offshore companies’ income to him did not require that income to be treated as no longer belonging to the companies for corporation tax purposes. The convictions concerning the concealment of their profits therefore remained sound.

3. Per Lord Hutton, sections 145, 154, 167 and 168 were intended to tax accommodation and benefits provided to shadow directors in the same way as those provided to formally appointed directors. Section 168(8) treated a person whose directions the directors were accustomed to follow as a director. Sections 167(1)(a) and 168(2) consequently treated such a person as employed in the office of director when the office’s emoluments fell to be assessed under Schedule E. The statutory circularity was deliberate and effective. Otherwise, a director in all but name could readily avoid the charge.

4. Per Lord Hutton, benefits made taxable as emoluments under sections 145(1) and 154(1) fell within paragraph 1 of Schedule E, rather than paragraph 5 alone. Each Case in paragraph 1 contained a territorial limitation. The statutory construction therefore did not impose an unlimited worldwide charge. The convictions based on accommodation and benefits received as a shadow director were safe.

5. Per Lord Hutton, [2001] 3 WLR 206 established that the Human Rights Act 1998 did not operate retrospectively to make unsafe, by reason of article 6, a pre-2 October 2000 conviction which was safe under domestic law when entered. That conclusion disposed of the self-incrimination ground.

6. Lord Hutton nevertheless considered the article 6 issue because it was fully argued and of general importance. A state may require taxpayers to provide information needed to assess and collect tax, and may enforce that duty through proportionate sanctions. A section 20(1) notice was therefore distinguishable from the compulsory investigative questioning in Saunders v United Kingdom.

7. Lord Hutton further concluded that the Hansard procedure induced truthful disclosure, not the provision of false information. The appellant could not characterise his false schedule as involuntary merely because truthful disclosure might have influenced the decision whether to prosecute. The reasoning in R v Barker was not followed.

1. House of Lords: The appeal was dismissed unanimously. The Court of Appeal’s decision and the convictions were affirmed: [2001] UKHL 45.
2. Court of Appeal (Criminal Division): The appellant’s appeal on several grounds was dismissed and all convictions were affirmed: [2000] QB 744; [2000] 3 WLR 273.
3. Crown Court at Knightsbridge: The appellant was convicted on 13 counts of cheating the public revenue. He received concurrent terms of imprisonment and a confiscation order under section 71 of the Criminal Justice Act 1988.