Introduction

The case of Wood v Revenue And Customs ([2016] UKUT 346 (TCC)) concerns the application of extended time limits for tax assessments under the Taxes Management Act 1970 (TMA). The personal representative of the deceased taxpayer, Michael Wood, appealed against assessments made by Her Majesty's Revenue and Customs (HMRC) under extended time limits, arguing that such assessments violated the right to a fair trial as stipulated in Article 6 of the European Convention on Human Rights (ECHR).

The central issue examined was whether the extended time limit assessments constituted a criminal charge under Article 6, thereby necessitating adherence to its procedural safeguards. The Upper Tribunal (Tax and Chancery Chamber) ultimately dismissed the appeal, affirming that the assessments did not engage Article 6.

Summary of the Judgment

The First-tier Tribunal (FTT) initially determined that the extended time limit assessments made under section 36(1A) of the TMA did not amount to a criminal charge, thus not infringing Article 6 of the ECHR. The Upper Tribunal upheld this decision, concluding that the provisions enabling HMRC to extend the assessment period were procedural mechanisms for recovering owed taxes rather than penal measures intended to punish. As a result, the personal representative's appeal was dismissed.

Analysis

Precedents Cited

The judgment extensively referenced several key cases to contextualize the application of Article 6:

• Ferrazzini v Italy (2001): Established that tax assessments fall outside the scope of Article 6 unless they resemble criminal charges.
• Engel v Netherlands (1976): Introduced the "Engel criteria" to determine if a procedure constitutes a criminal charge.
• Ezeh v United Kingdom (2003): Affirmed the application of Engel criteria in tax-related penalties.
• Jussila v Finland (2009): Reinforced that fiscal penalties can be criminal if they meet Engel criteria.
• Khan v Director of the Assets Recovery Agency (2006): Addressed whether discovery assessments under s29 TMA engaged Article 6.
• Charrington and others (2005): Discussed the necessity of state power to condemn or punish for a provision to be considered criminal.
• HMRC v O'Rorke (2014): Held that certain HMRC notices did not amount to criminal charges under Article 6.

Legal Reasoning

The Tribunal applied the Engel criteria to assess whether the extended assessment under s36(1A) TMA constituted a criminal charge. The criteria involve:

1. Classification of the offence under national law.
2. The nature of the offence.
3. The nature and severity of the penalty.

The Tribunal concluded:

• Classification: There was no explicit criminal offence defined under s29 or s36 TMA.
• Nature of Offence: The provision aimed to recover owed taxes, not to punish, aligning it with procedural recovery rather than criminal deterrence.
• Penalty Severity: The extended time limit did not impose a penalty but merely extended the window for HMRC to make assessments.

Consequently, the Tribunal determined that the provisions did not satisfy any of the Engel criteria, negating the engagement of Article 6.

Impact

This judgment clarifies the boundaries between procedural tax assessments and criminal charges. It reinforces the notion that extended time limits for assessments under the TMA are administrative tools for tax recovery and do not inherently constitute criminal proceedings. This distinction is crucial for ensuring that taxpayers' rights under the ECHR are appropriately protected without impeding HMRC's ability to recover owed taxes.

Future cases involving extended assessment periods will likely reference this decision to draw a clear line between punitive measures and recovery mechanisms in tax law.

Complex Concepts Simplified

Article 6 of the ECHR

Article 6 guarantees the right to a fair trial. It applies primarily to criminal proceedings but can extend to civil matters if they resemble criminal charges, necessitating due process and fair hearing standards.

Engel Criteria

Established in Engel v Netherlands, these criteria help determine if a procedure constitutes a criminal charge for Article 6 purposes. They assess:

• How the offence is classified under national law.
• The inherent nature of the offence (e.g., whether it is punitive or recovery-based).
• The severity and nature of the penalties imposed.

Discovery Assessments

Under the TMA, HMRC can make assessments beyond the usual time limits if specific conditions are met, such as deliberate non-compliance. These assessments aim to recover unpaid taxes and are subject to detailed procedural rules.

Taxes Management Act 1970 (TMA)

The TMA governs the administration and management of taxes in the UK. Sections 29 and 36 provide HMRC with powers to assess taxes that may have been under-declared, even beyond standard limitation periods, under certain conditions.

Conclusion

The Upper Tribunal's decision in Wood v Revenue And Customs reinforces the procedural nature of extended time limit assessments under the TMA. By methodically applying the Engel criteria, the Tribunal affirmed that such assessments do not constitute criminal charges under Article 6 of the ECHR. This distinction ensures that while HMRC retains the ability to recover owed taxes, taxpayers are not subjected to unfair treatment akin to criminal prosecution. The judgment serves as a pivotal reference for future disputes involving tax assessments and the interpretation of fair trial rights in the context of tax law.