wrote in message
...
Hello,

The following cases are referred to by some Inland Revenue literature.
I have obtained copies of the references but not being a lawyer, I
find them heavy reading. Can anyone explain these cases in layman's
terms to me?

To me, they look like findings that are specific to the facts of each case,
and not of general application. But I could be wrong, since I know nothing
about tax.


1. Nicholson versus Morris (Court of appeal 20 January 1977)

"The taxpayer, a barrister's clerk, was assessed to tax under Sch.E for the
years 1946-47 to 1960-61 inclusive, the Revenue having applied to the
General Commissioners for leave to make the assessment. The General
Commissioners decided that the taxpayer was guilty of fraud or wilful
default in respect of the whole of the period, confirmed the assessments and
granted interest certificates under the Taxes Management Act 1970 s.88(1).
The taxpayer did not give evidence before the General Commissioners, whose
decision was confirmed by Walton J.
Held, on appeal to the Court of Appeal, that the decision of the General
Commissioners and Walton, J. was correct and certificates of interest had
been properly granted."


2. G Deacon & Sons versus Commissioners of Inland Revenue (High Court
11 January 1952)

"The two partners of a firm were found to be in possession of a sum of GBP
29,000; during the years 1939 to 1943 the average profits of the firm were
stated to be about GBP 1,500 per annum. Donovan, J. held that there was
sufficient evidence to justify the findings of the General Commissioners
that the sum of GBP 28,000 represented undisclosed profits of the business."


3. Woodrow versus Whalley (High Court 9th December 1964)

"The Inspector of Taxes caused additional assessments to be made upon the
deceased, a farmer, for the years 1949-50 and 1952-53 in respect of sums
credited to a deposit account in the name of the deceased's wife. Upon
appeal by the deceased's executor, held (1) that there had been discovery
within the Income Tax Act 1952 s.41(1) when the deceased admitted to the
Inspector that his earlier returns were erroneous; (2) that on the evidence
wilful default on the part of the deceased had been established wherefore
the six-year time limit did not apply; but (3) that the sums in question
should be excluded from the assessments for the relevant years and the
appeal allowed."

On Wed, 27 Dec 2006 15:45:04 +0000, wrote:

By the way, I assume tax is a criminal matter? Is it? So would it be
"beyond reasonable doubt"?

This is your basic mistake. Tax is not a criminal matter. No
"presumption of innocence" applies, and "reasonable doubt" does not
come into it. The taxman has the power to make presumptions about
unaccounted-for sums of many, and raise an assessment accordingly.
This will stand unless the taxpayer can prove that the presumptions
employed are wrong. The taxman doesn't have to prove anything. That
seems to be the common factor in these cases.

--
Don Aitken
Mail to the From: address is not read.
To email me, substitute "clara.co.uk" for "freeuk.com"

On Wed, 27 Dec 2006 15:45:04 +0000, wrote:

snip

2. G Deacon & Sons versus Commissioners of Inland Revenue (High Court
11 January 1952)

"The two partners of a firm were found to be in possession of a sum of GBP
29,000; during the years 1939 to 1943 the average profits of the firm were
stated to be about GBP 1,500 per annum. Donovan, J. held that there was
sufficient evidence to justify the findings of the General Commissioners
that the sum of GBP 28,000 represented undisclosed profits of the business."


So this says the IR found more money than was declared so assumed it
to be illegal. It's hard to know what context this was in. If they
just said "we've found some money it must be illegal" that would be
wrong (in my opinion) if on the other hand they did do everything they
could to prove "beyond reasonable doubt" or "on the balance of
probabilities" that it was illegal, fair enough.


They didn't say anything at all about it being "illegal".

They just said it was money on which tax was owed.


By the way, I assume tax is a criminal matter? Is it? So would it be
"beyond reasonable doubt"?

No, it isn't a criminal matter.

The amount of tax you owe is purely civil.

It only becomes criminal if the IR (now HMRC) accuse you of tax
evasion, which is a crime, and is subject to all the usual rules of
evidence and proof.




3. Woodrow versus Whalley (High Court 9th December 1964)

"The Inspector of Taxes caused additional assessments to be made upon the
deceased, a farmer, for the years 1949-50 and 1952-53 in respect of sums
credited to a deposit account in the name of the deceased's wife. Upon
appeal by the deceased's executor, held (1) that there had been discovery
within the Income Tax Act 1952 s.41(1) when the deceased admitted to the
Inspector that his earlier returns were erroneous; (2) that on the evidence
wilful default on the part of the deceased had been established wherefore
the six-year time limit did not apply; but (3) that the sums in question
should be excluded from the assessments for the relevant years and the
appeal allowed."

This one has really got me puzzled. It seems to be shooting the IR in
the foot, or have I read it wrong? (1) The deceased admitted to the IR
his tax return was wrong (presumably before he became deceased) but
(3) seems to read that the Commissioners allowed the estate to appeal
the IR's assessments.

I'm no sure about point (2) what does "wherefore the six-year time
limit did not apply" mean? Does it mean that the six year limit
applied and the IR were out of time or does it mean the opposite: that
for some reason the Commissioners allowed an extention to the limit?

What this mans is that normally, if there is evidence of wilful
default, (i.e. it is deliberate by the taxpayer), then the six year
limit for investigations does not apply.

But what (1) means is that ("there had been discovery"), the IR had
already had sufficient information (in the previous admission) to have
inquired, and they did not do so. That in turn nullifies the effects
of wilful default in overriding the six year limit, so the appeal was
allowed.

Basically, HRC can *always* go back six years in their investigation.

They can go further only if (during their normal "up to six years"
enquiries) they discover things which appear to show deliberate
misrepresentation by the taxpayer.

But once those things have been discovered, if HMRC then close the
enquiry after that discovery, they lose the right to go back further
based on that evidence.
--
Alex Heney, Global Villager
"How to Catch Worms" by Earl E. Bird
To reply by email, my address is alexATheneyDOTplusDOTcom

wrote in message
...
On Wed, 27 Dec 2006 20:10:26 +0000, Alex Heney
wrote:

By the way, I assume tax is a criminal matter? Is it? So would it be
"beyond reasonable doubt"?

No, it isn't a criminal matter.

The amount of tax you owe is purely civil.


Hello again.

As you might have guessed I'm a newbie when it come to law. What is
the definition of criminal? I presumed it was any action brought by
the state, so that state v. me would be criminal but you v. me would
be civil. I guess this is wrong. I can't understand why not paying tax
isn't criminal because surely not paying tax is a crime?

A criminal action is one for which the (losing) result is a criminal
sanction; a criminal record plus a prison sentence or a fine, the
value of which is unrealted to the offence.

A civil action is one for which the (losing) result is "putting the
harmed party back into the position that they would have been if
they hadn't been harmed" (and no criminal record). This usually
involves handing over the sum of money that has been lost (plus
fees and interest).

The state is as capable of bring a civil action as anyone else is.

It only becomes criminal if the IR (now HMRC) accuse you of tax
evasion, which is a crime, and is subject to all the usual rules of
evidence and proof.

So deliberately not paying tax is a crime but accidentally not paying
enough is not? At what point does one become the other?

When HMG have the evidence.

tim

On Thu, 28 Dec 2006 15:50:04 +0000, wrote:

On Wed, 27 Dec 2006 20:10:26 +0000, Alex Heney
wrote:

By the way, I assume tax is a criminal matter? Is it? So would it be
"beyond reasonable doubt"?

No, it isn't a criminal matter.

The amount of tax you owe is purely civil.


Hello again.

As you might have guessed I'm a newbie when it come to law. What is
the definition of criminal? I presumed it was any action brought by
the state, so that state v. me would be criminal but you v. me would
be civil. I guess this is wrong.
Criminal means that it is an offence which can be prosecuted by the
relevant authority, where you will get a criminal record if found
guilty, and penalties can be quite severe.

Civil means that you can be sued or other civil action taken against
you. Civil cases will be decided on the balance of probability, rather
than "Beyond Reasonable Doubt", and will not lead to a prison
sentence, or any severe financial penalty. Nor will you have a
criminal record if you lose.

Although HMRC are an organ of the state, they are not acting as
prosecutors, and not normally bringing any criminal charges against
taxpayers.

I can't understand why not paying tax
isn't criminal because surely not paying tax is a crime?

If you do it deliberately, yes. Although even then, HMRC will rarely
prosecute unless it is a particularly serious instance.

They have the power to levy fines up to the same value as the
underpaid tax without taking a criminal prosecution, although they
VERY rarely go anywhere near that high.

There is also some question under Human Rights legislation about
whether fines at that high a level can actually be imposed without
criminal prosecution.



It only becomes criminal if the IR (now HMRC) accuse you of tax
evasion, which is a crime, and is subject to all the usual rules of
evidence and proof.

So deliberately not paying tax is a crime but accidentally not paying
enough is not? At what point does one become the other?


When you know you have done it, and take no action to correct it.


What this mans is that normally, if there is evidence of wilful
default, (i.e. it is deliberate by the taxpayer), then the six year
limit for investigations does not apply.

Sorry for my ignorance but what is "wilful default"? Does this mean if
he has deliberately (ie wilfully) not paid tax?

Yes.



Basically, HRC can *always* go back six years in their investigation.

They can go further only if (during their normal "up to six years"
enquiries) they discover things which appear to show deliberate
misrepresentation by the taxpayer.

But once those things have been discovered, if HMRC then close the
enquiry after that discovery, they lose the right to go back further
based on that evidence.

Thanks for the informative replies. How do you know so much are you a
lawyer?

No.

I am a freelance software developer, running my own "one man band"
limited company, and started taking a keen interest in this area after
the IR35 legislation was introduced in 2000-2001.

I probably *should* have taken an interest earlier than that, as tax
law affects everybody running a company, even more than it does
employees.
--
Alex Heney, Global Villager
I don't care who you are, Fatso. Get the reindeer off my roof!
To reply by email, my address is alexATheneyDOTplusDOTcom

On Thu, 28 Dec 2006 at 15:50:04 in uk.legal.moderated
wrote:
So deliberately not paying tax is a crime but accidentally not paying
enough is not? At what point does one become the other?

IIUC there's a distinction between declaring tax liability correctly and
paying the tax due. False declarations can be dealt with criminally
(but usually aren't). Failure to pay the declared liability is a civil
matter rather than criminal. IANAL.

--
Nogood Boyo

wrote in message
news
On Thu, 28 Dec 2006 23:00:05 +0000, Alex Heney
wrote:

I can't understand why not paying tax
isn't criminal because surely not paying tax is a crime?

If you do it deliberately, yes. Although even then, HMRC will rarely
prosecute unless it is a particularly serious instance.

They have the power to levy fines up to the same value as the
underpaid tax without taking a criminal prosecution, although they
VERY rarely go anywhere near that high.

There is also some question under Human Rights legislation about
whether fines at that high a level can actually be imposed without
criminal prosecution.

Thank you for your continued explanations. Can you tell me more about
this conflict between high fines and the Human Rights Act?

What are the typical levels of penalties?

Penalties are scaled from 0-100% of the tax due (in addition
to the tax due plus interest). Most are in the range 25-50%.

But TBH I don't think that it is these penalties that are at risk
as they are 'offered' to the defaulting party on the same basis
as a speeding ticket, i.e. "Volenteer to pay this to avoid a full
prosecution".

Where there is an issue with penalties are the fixed penalties
that are charged for being late with a form. This starts at 500
pounds for being late, followed by another 500 pounds for being
a bit more late until eventually it gets to 500 pounds for each
extra day.

These penalties do seem somewhat draconian.

tim

On Sat, 30 Dec 2006 11:00:11 +0000, wrote:

On Thu, 28 Dec 2006 23:00:05 +0000, Alex Heney
wrote:

I can't understand why not paying tax
isn't criminal because surely not paying tax is a crime?

If you do it deliberately, yes. Although even then, HMRC will rarely
prosecute unless it is a particularly serious instance.

They have the power to levy fines up to the same value as the
underpaid tax without taking a criminal prosecution, although they
VERY rarely go anywhere near that high.

There is also some question under Human Rights legislation about
whether fines at that high a level can actually be imposed without
criminal prosecution.

Thank you for your continued explanations. Can you tell me more about
this conflict between high fines and the Human Rights Act?


It is basically Article 6 of the HRA, which only applies to tax
matters (normally "administrative law") if the penalties to be applied
are severe enough to class as criminal sanctions.

In that case, the taxpayer is entitled to all the protections of a
criminal trial, which does not mean a jury, but does mean an
independent tribunal, a public hearing, and within a reasonable time,
plus "beyond reasonable doubt".

This was first determined in the European Court of Human Rights by a
case Georgiou v UK (2001), and has been confirmed by other cases
since.

According to guidelines on the HMRC site, they believe it applies when
the penalties they are seeking to impose are more than 20% of the tax
owed.

I am not sure the courts have actually set a definitive level.

What are the typical levels of penalties?

The typical levels are not a problem. It is the *possible* levels
which are a problem.

Penalties which HMRC have the power to set can be up to 100% of the
value of the tax defaulted on (this is in addition to having to pay
the tax of course).

But typically, they impose much less severe penalties than that.
--
Alex Heney, Global Villager
What color is a chameleon on a mirror?
To reply by email, my address is alexATheneyDOTplusDOTcom