Ashbolt & Anor v Revenue & Customs & Anor

Search warrants under Police and Criminal Evidence Act 1984, Schedule 1 require increasingly stringent safeguards according to their intrusiveness. The issuing judge must have reasonable grounds for believing that an indictable offence has been committed; proof of the offence is unnecessary. For the condition that other methods appeared bound to fail, the relevant belief is that of the applying officer at the time of application and must have cogent, case-focused grounds. Separately, the judge must be satisfied that notice of a production-order application may seriously prejudice the investigation. The same evidence may support both conditions, but each must be addressed separately. Deliberately submitting false documents to re-describe taxable remuneration may provide reasonable grounds for believing that fraud or cheating the public revenue has occurred.

HMRC investigated suspected fraud and cheating the public revenue arising from documents submitted in connection with disguised-remuneration schemes. The claimants challenged search and seizure warrants issued by the Crown Court sitting at Leeds under section 9 and Schedule 1 of the Police and Criminal Evidence Act 1984.

They argued that the evidence showed lawful tax avoidance rather than dishonest tax evasion, and that production orders or other less intrusive measures should have been used. They also challenged the adequacy of the material supporting the conclusion that notice might prejudice the investigation. The central issues were whether the statutory access conditions and additional warrant condition were satisfied, and whether any relief should follow.

1. Issue 1: The challenge to the finding of reasonable grounds for believing that an indictable offence had been committed failed. Lawful tax avoidance is distinct from evasion, but conduct may become criminal where false documents are deliberately and dishonestly submitted to HMRC to obtain a tax advantage. The court was concerned with reasonable grounds for belief, not proof that an offence had in fact been committed.
2. The evidence concerning the late production and backdating of fiduciary documents, their inconsistency with earlier loan documentation and bank records, and the claimants’ knowledge of the schemes provided ample grounds for believing that the documents were false and that the claimants had acted dishonestly. The omission of the dishonesty test in Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017]UKSC 67 caused no material error because the statutory threshold did not require proof of dishonesty.
3. Issue 2: The conditions in Schedule 1 paragraph 2(b)(ii) and paragraph 14(d) were separate safeguards and should be addressed separately. Under paragraph 2(b)(ii), the judge had to consider whether, at the time of application, it appeared to the officer that other methods were bound to fail. That belief required cogent, focused grounds; a bare assertion was insufficient. Under paragraph 14(d), the judge had personally to be satisfied that notice of a production-order application might seriously prejudice the investigation.
4. Although the issuing judge addressed the two conditions together, his finding of a real risk that evidence would be dissipated supported both conclusions. The written application explained the targets’ previous evasiveness, incomplete compliance with information notices, the apparent orchestration of responses and the risk of destruction, concealment or fabrication once the criminal investigation became known.
5. The warrants were lawfully issued. The judicial review application was dismissed. The claimants were ordered to pay HMRC’s costs, summarily assessed at £25,000. The court nevertheless stressed that future ex parte warrant applications should provide a short skeleton argument, identify the issues and address paragraphs 2(b) and 14(d) separately.

First-instance judicial review proceedings. Permission to apply was granted by Sir Duncan Ouseley on 27 November 2019. The Administrative Court dismissed the application.