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Procedure.Tax
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X1. Fraud offences
CHEATING THE PUBLIC REVENUE
Elements of the offence
- Any form of fraudulent conduct which results in depriving the revenue of money to which it is entitled
"[38] The offence of cheating the revenue was considered in this court in The Queen v Mavji [1987] 84 Cr. App R 34. The issue was whether the common law offence of cheating the revenue necessarily required a false representation, either by words or conduct. The appellant had failed to make VAT returns or to pay the VAT due. The court held that cheating could include any form of fraudulent conduct which resulted in diverting money from the revenue and depriving the revenue of money to which it was entitled." (R v. Stannard [2005] EWCA Crim 2717)
"In our judgment, “cheating the revenue” can take place without any positive act of deceit or, to adopt and respectfully endorse the words of Drake J. when ruling on this matter in the appellant's first trial:
“the common law offence of cheating 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 money to which it is entitled.” (R v. Mavji [1987] 1 WLR 1388, CoA)
"We think it would be right to say that although they were never abandoned these grounds did not appear in the van of Mr. Beckman's submissions. They all relate to the learned judge's direction as to what had to be proved to found the offence of cheating the revenue at common law. This the learned judge dealt with at pages 3 to 4 of the transcript:
“The next direction I have to give you is what in law is cheating the Public Revenue. To cheat, members of the jury, 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, dishonest 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.”
[...]
In our judgment the learned judge not only defined the offence in terms approved by this court in Mavji 84 Cr App R 34 and Redford 89 Cr App R 1 , and indicated the approach to the question of dishonesty as laid down by this court in Ghosh 75 Cr App R 154 , and far from tending to confuse the jury did so with the clarity which distinguishes the whole of the summing-up." (R v. Less 1993 WL 965668)
- Omission can be sufficient
"[42] Thus it is established:
(a) The offence can be proved on the basis of an omission.
(b) It can be constituted by deliberate conduct prejudicing the Revenue's right to the tax in question.
(c) The offence can be established without loss resulting from the cheat having been proved." (R v. Stannard [2005] EWCA Crim 2717)
"Mr Ashe Lincoln candidly conceded that if no distinction can be drawn in this context between an act and an omission, to use convenient shorthand, then this appeal fails. His submission was that this — as he would say, crucial — distinction did not fall to be considered in Reg. v. Hudson or indeed in Reg. v. Tonner [1985] 1 W.L.R. 344 to which we were referred by Mr Singer on behalf of the Crown. No doubt that is right except that in the opinion of this court the distinction is not crucial and, where it exists, as in the instant case, does not justify a departure from the conclusions reached by the Court of Criminal Appeal in Reg. v. Hudson . In coming to this decision we are influenced by the fact that in none of the cases or authorities such as Hawkins' Pleas of the Crown is the distinction between “deceit” involving an act or involving no more than an omission canvassed or regarded as vital or indeed relevant. The distinction has always been and in our view remains between “frauds affecting the Crown and public at large,” to repeat the words of Hawkins , and those which affect only individuals." (R v. Mavji [1987] 1 WLR 1388, CoA)
- Conduct must be dishonest (e.g. dishonest failure to submit tax return)
"This appellant was in circumstances in which he had a statutory duty to make value added tax returns and to pay over to the Crown the value added tax due. He dishonestly failed to do either. Accordingly, he was guilty of cheating HM The Queen and the public revenue. No further act or omission required to be alleged or proved." (R v. Mavji [1987] 1 WLR 1388, CoA)
- No need for a resultant loss
"[40] In R v Hunt [1994] Crim LR 747, a conviction of conspiracy to cheat the Inland Revenue was challenged on grounds which included the fact that the prosecution was unable to show that the appellant had benefited from the proceeds of the fraud. The court, Stuart-Smith LJ presiding, held that notwithstanding some expressions of opinion in the old cases, there was ample authority to show the offence of cheating the Revenue is "a conduct offence". "A distinction is drawn between cheating the public or the King, in which the resultant loss does not have to be proved, and cheating a private individual where it must be"." (R v. Stannard [2005] EWCA Crim 2717)
Relation to other offences
- Common law offence expressly retained alongside statutory offences
"[32] Here, however, Parliament has created statutory offences of fraud and conspiracy to defraud to which maximum penalties apply but it has also expressly retained the common law offence of cheating the revenue. The offence was singled out from the general abolition of common law dishonesty offences by section 32(1)(a) of the Theft Act 1968. Further, despite subsequent reviews of the offences of fraud, Parliament has left not only the offence in existence but the penalty at large. This is entirely consistent with the general approach over decades to major frauds on the revenue. They have always been treated as offences of particular seriousness.
[33] Thus, we are entirely confident that as far as Parliament is concerned, the offence of conspiracy to cheat the public revenue retains its established and clearly understood role in the prosecution of revenue cases. It is used to supplement the statutory framework and is recognised as the appropriate charge for the small number of the most serious revenue frauds, where the statutory offences will not adequately reflect the criminality involved and where a sentence at large is more appropriate than one subject to statutory restrictions. These are not 'ordinary' cases." (R v. Dosanjh [2013] EWCA Crim 2366)
- Generally reserved from the most serious and unusual offences
"[30] We can dispose of this ground relatively swiftly. As Mr Waddington for the Crown, observed, it is contrary to a consistent line of Court of Appeal authority going back over 25 years. We see no reason to dissent from the proposition in the Sentencing Guidelines Council's Definitive Guideline on Fraud to the effect that "the common law offence of cheating the public revenue is generally reserved for the most serious and unusual offences and where a sentence in excess of the statutory maximum would be proper". In our judgment that statement coincides with the law and best practice. We are not surprised, therefore, that the SGC's successor, the Sentencing Council, has adopted a similar approach in its recently published draft guideline." (R v. Dosanjh [2013] EWCA Crim 2366)
FRAUD BY FALSE REPRESENTATION
"(1) A person is guilty of fraud if he is in breach of any of the sections listed in subsection (2) (which provide for different ways of committing the offence).
(2) The sections are—
(a) section 2 (fraud by false representation),
(b) section 3 (fraud by failing to disclose information), and
(c) section 4 (fraud by abuse of position).
(3) A person who is guilty of fraud is liable—
(a) on summary conviction, to imprisonment for a term not exceeding the general limit in a magistrates’ court or to a fine not exceeding the statutory maximum (or to both);
(b) on conviction on indictment, to imprisonment for a term not exceeding 10 years or to a fine (or to both).
(4) Subsection (3)(a) applies in relation to Northern Ireland as if the reference to 12 months were a reference to 6 months." (Fraud Act 2006, s.1)
Note that the offence is complete before and irrespective of whether anyone has acted on the representation.
(1) Dishonestly making a false representation
"(1) A person is in breach of this section if he—
(a) dishonestly makes a false representation, and
(b) intends, by making the representation—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss." (Fraud Act 2006, s.2(1))
Representation
- As to fact or law, including state of mind
"(3) “Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a) the person making the representation, or
(b) any other person." (Fraud Act 2006, s.2(2))
- May be express or implied
"(4) A representation may be express or implied." (Fraud Act 2006, s.2(3))
- Includes a representation to a system or device
(5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention)." (Fraud Act 2006, s.2(3))
False representation
- Untrue or misleading
"(2) A representation is false if—
(a) it is untrue or misleading, and
(b) the person making it knows that it is, or might be, untrue or misleading." (Fraud Act 2006, s.2(2))
If falsity depends on the legal effect of a document, that is to be determined by the judge.
- Person making it known that it is or might be untrue or misleading
"(2) A representation is false if—
(a) it is untrue or misleading, and
(b) the person making it knows that it is, or might be, untrue or misleading." (Fraud Act 2006, s.2(2))
- Reasonable suspicion that it was false or misleading not enough
"[9] ... In our judgment, it not good enough for the prosecutor to satisfy the jury that the accused ought to have appreciated that the representation made by him was or might be untrue or misleading, nor is it enough that the circumstances must have given rise to a reasonable suspicion that the representation was, or might be, untrue or misleading. Of course, if an accused person wilfully shuts his eyes to the obvious doubts as to the genuineness of the misrepresentation that he is making, then he knows that it might be untrue or misleading and he would be guilty of the offence..." (R v. Augunas [2013] EWCA Crim 2046)
Dishonestly made
- Objective standard of dishonesty applies to the facts as known and relating to D
"[84] Thus, the Supreme Court proposed an alternative two-stage test: (a) what was the defendant's actual state of knowledge or belief as to the facts; and (b) was his conduct dishonest by the standards of ordinary decent people?
...
[108] This approach, which was the approach of the Supreme Court in Ivey, makes clear that when Lord Hughes talked in [74] of the "actual state of mind as to knowledge or belief as to the facts" [our emphasis] he was referring to all the circumstances known to the accused and not limiting consideration to past facts. All matters that lead an accused to act as he or she did will form part of the subjective mental state, thereby forming a part of the fact-finding exercise before applying the objective standard. That will include consideration, where relevant, of the experience and intelligence of an accused. In an example much used in debate on this issue, the visitor to London who fails to pay for a bus journey believing it to be free (as it is, for example, in Luxembourg) would be no more dishonest that the diner or shopper who genuinely forgets to pay before leaving a restaurant or shop. The Magistrates or jury in such cases would first establish the facts and then apply an objective standard of dishonesty to those facts, with those facts being judged by reference to the usual burden and standard of proof." (R v. Barton [2020] EWCA Crim 575)
(2) Intending to make a gain or cause a loss/risk of loss
"(1) A person is in breach of this section if he—
(a) dishonestly makes a false representation, and
(b) intends, by making the representation—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss." (Fraud Act 2006, s.2(1))
- Gain or loss in money or other property
"(1) The references to gain and loss in sections 2 to 4 are to be read in accordance with this section.
(2) “Gain” and “loss”—
(a) extend only to gain or loss in money or other property;
(b) include any such gain or loss whether temporary or permanent;
and “property” means any property whether real or personal (including things in action and other intangible property)." (Fraud Act 2006, s.5)
- Including keeping what one already has or not getting what one might get
"(3) “Gain” includes a gain by keeping what one has, as well as a gain by getting what one does not have.
(4) “Loss” includes a loss by not getting what one might get, as well as a loss by parting with what one has." (Fraud Act 2006, s.5)
TAX SPECIFIC OFFENCES
Knowingly concerned in the fraudulent evasion of income tax
"(1) A person commits an offence if that person is knowingly concerned in the fraudulent evasion of income tax by that or any other person.
(2) A person guilty of an offence under this section is liable—
(a) on summary conviction, to imprisonment for a term not exceeding 12 months or a fine not exceeding the statutory maximum, or both, or
(b) on conviction on indictment, to imprisonment for a term not exceeding 7 years or a fine, or both.
(3) In the application of subsection (2)(a)—
(a) in England and Wales in relation to offences committed before the commencement of section 282(3) of the Criminal Justice Act 2003, and
(b) in Northern Ireland,
for “12 months” substitute “6 months”.
(4) This section does not apply to things done or omitted before 1st January 2001." (TMA 1970, s.106A)
Knowingly making a false statement to obtain allowance or repayment (Scotland)
"(1) This section applies only in Scotland.
(2) If any person, for the purpose of obtaining any allowance, reduction, rebate or repayment in respect of tax, either for himself or for any other person, or, in any return made with reference to tax, knowingly makes any false statement or false representation, he shall be liable, on summary conviction, to imprisonment for a term not exceeding six months.
(3) Notwithstanding anything in the Summary Jurisdiction (Scotland) Act 1954 proceedings for an offence under this section may be commenced at any time within three years from the time when the offence was committed.
(4) The expression “return” in this section shall be construed without regard to the definition in section 118(1) of this Act." (TMA 1970, s.107)
Knowingly concerned in the fraudulent evasion of SDLT
"(1) A person commits an offence if he is knowingly concerned in the fraudulent evasion of tax by him or any other person.
(2) A person guilty of an offence under this section is liable—
(a) on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both;
(b) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine, or both." (FA 2003, s.95)
VAT fraud
VATA 1994, s.72.