Khan v Customs & Excise

Article 6 applies to proceedings for a civil evasion penalty under section 60 of the Value Added Tax Act 1994, but that classification does not make the proceedings criminal for every domestic purpose. A tribunal may respect a taxpayer’s choice of non-lawyer representative unless ineffective representation is manifest or sufficiently brought to its attention. A failure to follow PACE Code C does not make interview evidence inadmissible in a VAT Tribunal appeal, particularly where the taxpayer attended voluntarily, was told that the investigation was civil, and could leave. Customs bears the burden of proving the elements of section 60 liability, including that the taxpayer was liable to register for VAT; the standard remains the civil balance of probabilities. The Tribunal’s unsound averaging method did not justify interference because its conclusions were independently supported and the error was immaterial.

The appellant appealed against a VAT and Duties Tribunal decision dated 10 February 2003. The Tribunal had upheld compulsory VAT registration, reduced a best-judgment assessment under section 73(1) of the Value Added Tax Act 1994, and upheld a civil evasion penalty under section 60, subject to mitigation.

The appeal alleged unfair representation, unfair admission of interview evidence, errors concerning the burden and standard of proof, and irrationality in the assessment calculation. The central questions were whether Article 6 required the Tribunal to intervene in the appellant’s representation, whether PACE Code C governed the interview or required exclusion of its evidence, and whether the Tribunal’s approach to proof and calculation was legally defective.

The appeal was dismissed.

1. Representation. Article 6(3)(c) applied to the section 60 penalty proceedings. The relevant question was whether ineffective representation was manifest or had otherwise been brought sufficiently to the Tribunal’s attention. A tribunal should respect an individual’s autonomy in choosing how to be represented. Nothing in the accountant’s conduct, including the form of the defence document, his potential presence as a witness, or his decision not to call the appellant, required intervention.
2. Interview evidence and PACE. The classification of section 60 proceedings as involving a criminal charge for Convention purposes did not make the proceedings criminal for domestic purposes. “Offence” in PACE meant a criminal offence in the domestic sense. Customs officers investigating whether the appellant’s VAT affairs complied with the law and whether a civil penalty should be imposed were not thereby investigating an offence for section 67(9) purposes. The case was distinguishable from R v Gill and Another [2004] 1 WLR 469, where the investigation contemplated possible criminal prosecution. In any event, PACE did not require the VAT Tribunal to exclude evidence for non-compliance with Code C. Rule 28 of the Value Added Tax Tribunals Rules 1986 expressly prevented refusal of evidence solely because it would be inadmissible in a court.
3. Proof. Customs bore the burden of proving the matters in section 60(1)(a) and (b). That included proving, for the purpose of showing an omission to register was intended to evade VAT, that the appellant was liable to register. Customs also had to show that some VAT had been evaded, although the precise burden concerning the amount of VAT evaded was not finally resolved. The standard was the civil balance of probabilities. The Tribunal applied that standard correctly, and the evidence sufficiently supported its finding of dishonesty.
4. Assessment and irrationality. The Tribunal’s method of averaging ticket prices was unsound in principle. However, the error did not affect the threshold or dishonesty findings and did not justify alteration or remittal. The Tribunal was entitled to make a practical allowance for the possibility that two earlier samples were untypical, and its figure was supported by the appellant’s own evidence about weekly takings and ticket-book use.

The appeal was from the VAT and Duties Tribunal’s decision dated 10 February 2003 following its hearing on 18 and 19 December 2002. The High Court dismissed the appeal.