Publications - Commercial Litigation & Dispute Resolution - Scotland
20 February 2006
Prosecution North and South
By Jim Cormack and Jonathan Fisher QC
(Published Tax Journal)
Jim Cormack and Jonathan Fisher QC consider the differences arising in HMRC prosecutions for tax offences north and south of the Scottish border
This article considers some of the differences arising in prosecutions for tax offences, depending upon whether the prosecution is brought north or south of the border with Scotland, and focuses, in particular, on the ability of HM Revenue & Customs (HMRC) to choose the place of prosecution in certain cases.
The criminal courts
Cheating the public revenue is the principal offence charged by HMRC in England and Wales. Being an offence at common law, it is tried on indictment only and has to be heard in the Crown Court, by a judge sitting with a jury. The less serious statutory tax offences, such as falsifying documents required by a tax inspector contrary to the Taxes Management Act 1970, s 20BB, fraudulently evading income tax contrary to the Finance Act 2000, s 144, and offences contrary to VATA 1994, s 72, are offences 'triable either way', which means they can be heard in a Magistrates Court, by a fulltime District Judge or three lay Justices of the Peace whose sentencing powers are limited to a maximum of six months' imprisonment. As a general rule, the location of the Magistrates Court is determined by the place where the offences were allegedly committed.
In Scotland the relevant criminal courts are the High Court of Justiciary, which is both the first instance trial court for serious crime and the criminal appeal court, and the Sheriff Court. The High Court has jurisdiction over the whole of Scotland whereas the jurisdiction of each Sheriff Court covers its own area (known as a 'Sheriffdom'). The key issue is the location of the alleged criminal conduct and not the residence of the accused. It follows that persons resident in Scotland are regularly prosecuted in the jurisdiction in which the crime was allegedly committed, rather than the place where they live or work.
Under the Customs and Excise Management Act 1979, s 148, specific provision is made in England and Wales for the place of trial where offences have been committed under that Act. Proceedings may be commenced in any court having jurisdiction in the place where the taxpayer resides or is found, or in the place where the offence was committed. There is no equivalent provision in the Taxes Management Act 1970, although by Schedule 3 proceedings before the General Commissioners must be brought in the place where the taxpayer resides or conducts his work or business.
The prosecutor
The prosecutor in the High Court of Justiciary is the Lord Advocate or one of his deputies. The prosecutor in the Sheriff Court is the procurator fiscal for that court. Decisions on whether or not to bring and continue with prosecutions in Scotland are matters entirely for the Lord Advocate or the relevant procurator fiscal as the case may be. By contrast, in England and Wales HMRC is the prosecuting authority in its own right. This division is recognised to an extent by the Prosecution Policy of HMRC, which states that 'in Scotland the prosecutions function is carried out by the Procurator Fiscal'.
Although HMRC is the prosecuting authority, the Director of the Revenue and Customs Prosecution Office is required to discharge his functions 'under the superintendence of the Attorney General'. The Director is also required by law to have regard to the Code for Crown Prosecutors when deciding whether or not a prosecution should be instituted or continued.
Defence representation
Aside from the different identity of the prosecuting authority, a person who lives in England and Wales but who faces prosecution in Scotland will need to instruct Scottish qualified solicitors and, if necessary, Scottish counsel. Conversely, a Scottish resident will need to employ English or Welsh lawyers if he is prosecuted in England or Wales. The majority of solicitors and barristers are qualified to practice in only one jurisdiction, although there are some notable exceptions.
Different verdicts
When a person is tried south of the border, the verdict is either one of 'guilty' or 'not guilty'. Occasionally, when a case is tried in the Crown Court a jury can fail to agree (where, after a majority direction) less than ten are agreed on their verdict. In this event the prosecutor decides whether to proceed with a re-trial, or to offer no evidence and withdraw the proceedings. There is no middle course between conviction and acquittal.
The position in Scotland is different. A defendant may be acquitted, not on the basis of a verdict of 'not guilty' but on the more qualified verdict of 'not proven'. The third verdict of not proven, in addition to guilty and not guilty, is in the UK a unique feature of the Scottish jurisdiction. The verdict of not proven is available to the court where it considers that the prosecutor has not proved the charge beyond reasonable doubt but nonetheless the court is not prepared to find the accused not guilty.
Different criminal offences
Aside from the serious practical issues which arise when prosecuted far from home in a different legal system, there is also the point that, at least so far as common law crimes are concerned, the relevant offences may differ as between the jurisdictions. In Scotland fraud is defined generally as the bringing about of some definite practical result by means of false pretences. The usual example of a false pretence is a written or verbal statement but fraud may also be committed by silence in the face of a duty to speak. Attempted fraud is a separate crime in the law of Scotland. In Scotland the crime of practical cheating is typically found in the uttering or presentation of forged documents as genuine.
In England and Wales cheating the revenue at common law is a much wider concept. The use of forged documents is often a hallmark of conduct properly described as cheating, but it is not necessarily so. The most useful modern definition of the offence of cheating appears in Less (12 March 1993, unreported), where the Court of Appeal upheld a direction to the jury in the following terms: 'To cheat ... is defined by the Concise Oxford Dictionary as: "To deceive or trick a person into or out of a thing". The common law offence of cheating the public revenue does not necessarily require a false representation either by words or conduct. Cheating can include any form of fraudulent conduct which results in diverting money from the revenue and in depriving the revenue of the money to which it is entitled. It has, of course, to be fraudulent conduct. That is to say, deliberate conduct by the defendant to prejudice, or take the risk of prejudicing, the revenue's right to the tax in question, knowing that he has no right to do so.'
Confiscation
Confiscation is an extremely important aspect of the criminal process today, and the provisions of the Proceeds of Crime Act 2002 are in many respects quite draconian. The law in England and Wales, when compared with Scotland, is broadly similar, although there is one significant difference in relation to the enforcement of a confiscation order where a family home is involved. In Scotland a confiscation order cannot be made unless the prosecutor is satisfied that the family home has been acquired as a benefit from the offender's criminal conduct. What is more, before the home can be sold the administrator must obtain the consent of all those with an interest in the property or apply to the court for authority to carry out the disposal. When considering an application, the High Court of Justiciary must have regard to all the circumstances of the case, including the needs and financial resources of the spouse and any child of the family. There are no equivalent provisions applying in England and Wales. In this respect, there is a greater level of protection against the risk of injustice to a defendant's family north of the border.
Revenue option
It is well known that the tax affairs of many taxpayers who are resident in England and Wales are dealt with by HMRC offices in Scotland. This gives rise to a question of criminal jurisdiction where the alleged offence is committed by a communication sent by the taxpayer from his or her residence in England and Wales to an HMRC office located in Scotland. The possibility of the taxpayer being prosecuted in Scotland in such circumstances is explicitly recognised in HMRC's Prosecution Policy, which states:
'In cases where an English or Welsh resident taxpayer has committed an offence in Scotland, because their tax office is located there, the deciding factor in determining the place of prosecution will rest on the balance of convenience. That is, where the taxpayer and the majority of the witnesses reside. This ensures that the Revenue maintains a common sense and reasonable approach to the taxpayer and any witnesses who may be required to give evidence in court.'
This statement implies that HMRC considers that in such cases it can exercise a discretion whether or not to prosecute the case in Scotland or in England and Wales. This discretion can be exercised only where the taxpayer has committed an offence or offences known to both legal systems and where the criminal courts of both legal systems have jurisdiction. However, if the court of the place of residence of an English taxpayer has jurisdiction, it may be thought fundamentally inappropriate for such a taxpayer to face prosecution in Scotland, far from his residence and in a different legal system, in relation to a general matter such as tax. It is not as if the taxpayer has chosen to carry out any activity in Scotland which led to his or her prosecution there. Indeed, it is possible that the taxpayer has no connection with Scotland, save for the fact that his or her tax office happens to have been located in Scotland.
The principal jurisdictional rule in Scotland is that the Scottish courts have jurisdiction if the main act of the crime has been done there. Scotland can still be the place of the main act for these purposes even if all that can be said is that the totality of the events in Scotland played a material part. Importantly, Scots law recognises the rule that a crime committed by means of using some form of communications medium (usually the post) is committed at both ends of transmission so that the courts of both place of sending and place or receipt have jurisdiction. While it is therefore clear that alleged offences committed by posting a return or claim from England to an HMRC office in Scotland can be tried in either jurisdiction, it is less satisfactory to think of how this might be applied in an age of electronic filing.
The possibility remains that in such a case HMRC could determine that the balance of convenience falls in favour of a criminal prosecution in Scotland merely because the majority of witnesses (such as Inspectors of Taxes) are located in Scotland. Such a determination would accord with the language of the guidance set out in the Prosecution Policy, if not its spirit. Indeed, it is perfectly possible in such a case that it is only the taxpayer and his accountant who are resident in England or Wales.
Common sense
In this situation, would an English taxpayer have any remedy in Scotland to compel the case to be tried in England? The answer is probably not. In this situation, let us hope that HMRC continues to maintain a common-sense and reasonable approach, and thereby ensures that this problem does not arise in practice.
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