Mohammed Butt & Anor v National Crime Agency

For the extended time limit in Taxes Management Act 1970, the taxing authority need not prove that undeclared income came from an identified taxable source. It must establish a prima facie case that culpable conduct caused some tax to go unpaid. If the taxpayer does not adequately answer that case, the burden then falls on the taxpayer to show that the assessment is wrong.

An appellate tribunal may uphold factual inferences from unexplained expenditure and deposits where the First-tier Tribunal was entitled to reject the taxpayer’s explanations and gave adequate reasons when its decision is read as a whole. Knowledge of an obligation to notify taxable income may be inferred from the surrounding circumstances.

The National Crime Agency adopted HMRC’s Revenue functions under the Proceeds of Crime Act 2002 and issued discovery assessments and penalties against Mr Butt and Mrs Begum. The assessments concerned unexplained expenditure, property transactions, deposits and other funds over a number of tax years.

On 21 September 2023, the First-tier Tribunal upheld the assessments. The appellants contended that the National Crime Agency had to prove an actual loss of tax arising from an identified trade of money laundering or other criminal activity. They also challenged the First-tier Tribunal’s treatment of the statutory source provisions, its factual findings, rental-income issues, and its finding that Mrs Begum had deliberately caused a loss of tax.

The central issue was the scope of the National Crime Agency’s burden to establish a loss of tax for the extended time limits in section 36.

1. Appeals dismissed. The First-tier Tribunal made no material error of law in upholding the discovery assessments and penalties.

2. For section 36 of the Taxes Management Act 1970, the National Crime Agency had to establish a prima facie case of a loss of tax caused by culpable conduct. It did not have to prove the taxability of particular receipts in particular years, or identify a specified taxable source such as a money-laundering trade. The unexplained expenditure and deposits performed the same evidential function as capital statements: they called for a satisfactory explanation from the taxpayers. The First-tier Tribunal was entitled to find that none was given.

3. The First-tier Tribunal had not treated satisfaction of the qualifying condition in section 317 of the Proceeds of Crime Act 2002 as itself establishing the statutory loss of tax. In any event, the recorded concession extended to loss of tax, and the First-tier Tribunal had independently found a loss of tax from the appellants’ access to funds and lifestyle without a credible explanation.

4. Ground 2 failed because the First-tier Tribunal had not used section 319 of the Proceeds of Crime Act 2002 to remove a supposed obligation to prove a money-laundering trade. It was therefore unnecessary to decide the wider construction of that provision.

5. The First-tier Tribunal made no finding that either appellant had carried on money laundering or derived income from criminal conduct. Its inference of undeclared income was open to it on the primary facts, its assessment of the witnesses, and its rejection of unsupported explanations. Its reasons were adequate when read with its year-by-year findings.

6. Mrs Begum’s liability was not based on Mr Butt’s income. The evidence of transactions, expenditure, assets and undeclared income entitled the First-tier Tribunal to infer that she knew she should notify her tax liability and deliberately failed to do so. The assessments were therefore in time.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the appellants’ appeals: [2025] UKUT 145 (TCC).
• First-tier Tribunal: on 21 September 2023, upheld the National Crime Agency’s discovery assessments and penalties.