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T8: Freezing and confiscation orders

Freezing orders in relation to tax avoidance and promoters

 

Determined as if made after FTT determined penalty

"(1) Subsection (2) applies where —
(a) an application is made on behalf of HMRC to a court in England and Wales for a freezing order in relation to a relevant penalty (see section 90) before the penalty is determined, and
(b) the court considering the application is satisfied that HMRC have a good arguable case in relation to the penalty and—
(i) have commenced proceedings before the First-tier Tribunal in relation to it, or
(ii) intend to commence proceedings before the First-tier Tribunal in relation to it within the initial period.
(2) The court is to determine the application as if it were being made immediately after the First-tier Tribunal had determined the penalty on the basis sought, or to be sought, by HMRC.
(3) A freezing order granted by virtue of subsection (2) may not take effect unless HMRC commence proceedings before the First-tier Tribunal in relation to the penalty before the end of the initial period (whether before or after the making of the application for the order).
(4) In this section, a “freezing order” is an order granted in accordance with rule 25.1(1)(f) of the Civil Procedure Rules." (FA 2022, s.87)

Relevant penalty


"(3) A relevant penalty is a penalty that is to be determined by the First-tier Tribunal under—
(a) section 98C of TMA 1970 (disclosure of tax avoidance schemes);
(b) Schedule 35 to FA 2014 (promoters of tax avoidance schemes: penalties);
(c) Schedule 36 to FA 2008 (information and inspection powers) as it has effect in relation to Schedule 16 to F(No.2)A 2017 (penalties for enablers of defeated tax avoidance) (see Part 9 of Schedule 16 to F(No.2)A 2017);
(d) Schedule 17 to F(No.2)A 2017 (disclosure of tax avoidance schemes: VAT and other indirect taxes)." (FA 2022, s.90)

Initial period

"(4) The “initial period” is the period of 72 hours beginning with the time at which the application mentioned in section 87, 88 or 89, as the case may be, is determined.
(5) In calculating the period of 72 hours in subsection (4), disregard the whole of any day that is—
(a) a Saturday,
(b) a Sunday,
(c) Christmas Day,

(d) Good Friday, or
(e) a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom in which the application mentioned in section 87, 88 or 89, as the case may be, is made." (FA 2022, s.90)

 

Freezing orders in relation to tax avoidance and promoters

CONFISCATION ORDERS

CONFISCATION ORDERS

Pre-conditions

"(1) The Crown Court must proceed under this section if the following two conditions are satisfied.
(2) The first condition is that a defendant falls within any of the following paragraphs—
(a) he is convicted of an offence or offences in proceedings before the Crown Court;
(b) he is committed to the Crown Court for sentence in respect of an offence or offences under section 3, 4 or 6 section 3, 3A, 3B, 3C, 4, 4A or 6 of the Sentencing Act any provision of sections 14 to 20 of the Sentencing Code;
(c) he is committed to the Crown Court in respect of an offence or offences under section 70 below (committal with a view to a confiscation order being considered).
(3) The second condition is that—
(a) the prosecutor asks the court to proceed under this section, or
(b) the court believes it is appropriate for it to do so." (POCA 2002, s.6)

Pre-conditions

Determine benefit from criminality and recoverable amount

 

"(4) The court must proceed as follows—
(a) it must decide whether the defendant has a criminal lifestyle;
(b) if it decides that he has a criminal lifestyle it must decide whether he has benefited from his general criminal conduct;
(c) if it decides that he does not have a criminal lifestyle it must decide whether he has benefited from his particular criminal conduct.
(5) If the court decides under subsection (4)(b) or (c) that the defendant has benefited from the conduct referred to it must—
(a) decide the recoverable amount, and
(b) make an order (a confiscation order) requiring him to pay that amount. Paragraph (b) applies only if, or to the extent that, it would not be disproportionate to require the defendant to pay the recoverable amount." (POCA 2002, s.6)

Balance of probabilities

"(7) The court must decide any question arising under subsection (4) or (5) on a balance of probabilities." (POCA 2002, s.6)

Determine benefit from criminality and recoverable amount

Recoverable amount: quantum

 

Equal to D's benefit from conduct

"(1) The recoverable amount for the purposes of section 6 is an amount equal to the defendant’s benefit from the conduct concerned." (POCA 2002, s.7)

 

Property to be ignored in calculating D's benefit

(4) In calculating the defendant’s benefit from the conduct concerned for the purposes of subsection (1), the following must be ignored—(a) any property in respect of which a recovery order is in force under section 266,(b) any property which has been forfeited in pursuance of a forfeiture notice under section 297A or an account forfeiture notice under section 303Z9(c) any property in respect of which a forfeiture order is in force under section 298(2), 303O(3), 303R(3) or 303Z14(4), and(d) any property which is the forfeitable property in relation to an order under section 303Q(1)." (POCA 2002, s.7)

Unless available amount is less

"(2) But if the defendant shows that the available amount is less than that benefit the recoverable amount is—
(a) the available amount, or
(b) a nominal amount, if the available amount is nil." (POCA 2002, s.7)

Available amount statement to be included in order

"(5) If the court decides the available amount, it must include in the confiscation order a statement of its findings as to the matters relevant for deciding that amount." (POCA 2002, s.7)

Cases where the victim may claim compensation

"(3) But if section 6(6) or 6(6A) applies the recoverable amount is such amount as—
(a) the court believes is just, but
(b) does not exceed the amount found under subsection (1) or (2) (as the case may be)." (POCA 2002, s.7)

Recoverable amount: quantum

- D's benefit

 

"(1) If the court is proceeding under section 6 this section applies for the purpose of—

(a) deciding whether the defendant has benefited from conduct, and

(b) deciding his benefit from the conduct.

(2) The court must—

(a) take account of conduct occurring up to the time it makes its decision;

(b) take account of property obtained up to that time.

(3) Subsection (4) applies if—

(a) the conduct concerned is general criminal conduct,

(b) a confiscation order mentioned in subsection (5) has at an earlier time been made against the defendant, and

(c) his benefit for the purposes of that order was benefit from his general criminal conduct.

(4) His benefit found at the time the last confiscation order mentioned in subsection (3)(c) was made against him must be taken for the purposes of this section to be his benefit from his general criminal conduct at that time.

(5) If the conduct concerned is general criminal conduct the court must deduct the aggregate of the following amounts—

(a) the amount ordered to be paid under each confiscation order previously made against the defendant;

(b) the amount ordered to be paid under each confiscation order previously made against him under any of the provisions listed in subsection (7).

(6) But subsection (5) does not apply to an amount which has been taken into account for the purposes of a deduction under that subsection on any earlier occasion.

(7) These are the provisions—

(a) the Drug Trafficking Offences Act 1986 (c. 32);

(b) Part 1 of the Criminal Justice (Scotland) Act 1987 (c. 41);

(c) Part 6 of the Criminal Justice Act 1988 (c. 33);

(d) the Criminal Justice (Confiscation) (Northern Ireland) Order 1990 (S.I. 1990/2588 (N.I. 17));

(e) Part 1 of the Drug Trafficking Act 1994 (c. 37);

(f) Part 1 of the Proceeds of Crime (Scotland) Act 1995 (c. 43);

(g) the Proceeds of Crime (Northern Ireland) Order 1996 (S.I. 1996/1299 (N.I. 9));

(h) Part 3 or 4 of this Act.

(8) The reference to general criminal conduct in the case of a confiscation order made under any of the provisions listed in subsection (7) is a reference to conduct in respect of which a court is required or entitled to make one or more assumptions for the purpose of assessing a person’s benefit from the conduct." (POCA 2002, s.8)

- D's benefit

- Available amount

 

"(1) For the purposes of deciding the recoverable amount, the available amount is the aggregate of—

(a) the total of the values (at the time the confiscation order is made) of all the free property then held by the defendant minus the total amount payable in pursuance of obligations which then have priority, and

(b) the total of the values (at that time) of all tainted gifts.

(2) An obligation has priority if it is an obligation of the defendant—

(a) to pay an amount due in respect of a fine or other order of a court which was imposed or made on conviction of an offence and at any time before the time the confiscation order is made, or

(b) to pay a sum which would be included among the preferential debts if the defendant’s bankruptcy had commenced on the date of the confiscation order or his winding up had been ordered on that date.

(3) “Preferential debts” has the meaning given by section 386 of the Insolvency Act 1986 (c. 45)." (POCA 2002, s.9)

- Available amount

Assumptions in case of criminal lifestyle

 

"(1) If the court decides under section 6 that the defendant has a criminal lifestyle it must make the following four assumptions for the purpose of—
(a) deciding whether he has benefited from his general criminal conduct, and
(b) deciding his benefit from the conduct.
(2) The first assumption is that any property transferred to the defendant at any time after the relevant day was obtained by him—
(a) as a result of his general criminal conduct, and
(b) at the earliest time he appears to have held it.
(3) The second assumption is that any property held by the defendant at any time after the date of conviction was obtained by him—
(a) as a result of his general criminal conduct, and
(b) at the earliest time he appears to have held it.
(4) The third assumption is that any expenditure incurred by the defendant at any time after the relevant day was met from property obtained by him as a result of his general criminal conduct.
(5) The fourth assumption is that, for the purpose of valuing any property obtained (or assumed to have been obtained) by the defendant, he obtained it free of any other interests in it.
(6) But the court must not make a required assumption in relation to particular property or expenditure if—
(a) the assumption is shown to be incorrect, or
(b) there would be a serious risk of injustice if the assumption were made.
(7) If the court does not make one or more of the required assumptions it must state its reasons.
(8) The relevant day is the first day of the period of six years ending with—
(a) the day when proceedings for the offence concerned were started against the defendant, or
(b) if there are two or more offences and proceedings for them were started on different days, the earliest of those days.
(9) But if a confiscation order mentioned in section 8(3)(c) has been made against the defendant at any time during the period mentioned in subsection (8)—
(a) the relevant day is the day when the defendant’s benefit was calculated for the purposes of the last such confiscation order;
(b) the second assumption does not apply to any property which was held by him on or before the relevant day.
(10) The date of conviction is—
(a) the date on which the defendant was convicted of the offence concerned, or
(b) if there are two or more offences and the convictions were on different dates, the date of the latest." (POCA 2002, s.10)

- Assumptions in case of criminal lifestyle

- Extent of D's interest in property

 

"(1) Where it appears to a court making a confiscation order that—
(a) there is property held by the defendant that is likely to be realised or otherwise used to satisfy the order, and
(b) a person other than the defendant holds, or may hold, an interest in the property, the court may, if it thinks it appropriate to do so, determine the extent (at the time the confiscation order is made) of the defendant's interest in the property.
(2) The court must not exercise the power conferred by subsection (1) unless it gives to anyone who the court thinks is or may be a person holding an interest in the property a reasonable opportunity to make representations to it.
(3) A determination under this section is conclusive in relation to any question as to the extent of the defendant's interest in the property that arises in connection with—
(a) the realisation of the property, or the transfer of an interest in the property, with a view to satisfying the confiscation order, or
(b) any action or proceedings taken for the purposes of any such realisation or transfer.
(4) Subsection (3)—
(a) is subject to section 51(8B), and
(b) does not apply in relation to a question that arises in proceedings before the Court of Appeal or the Supreme Court.
(5) In this Part, the “extent” of the defendant's interest in property means the proportion that the value of the defendant's interest in it bears to the value of the property itself." (POCA 2002, s.10A)

- Extent of D's interest in property

Disproportionality proviso: general principles

 

"[28] In deciding on the correct approach to disproportionality it is helpful to look at a number of past cases albeit that none of them has dealt directly with cv fraud. The most significant is R v Waya [2012] UKSC 51; [2013] 1 AC 294, which concerned a mortgage loan obtained by fraud, in which the Supreme Court, in a judgment delivered by Lord Walker and Hughes LJ, laid down the following points:
(i)                Most importantly, prior to the insertion of the proviso in section 6(5), it was accepted that, in order not to infringe Article 1 Protocol 1 (“A1P1”) of the European Convention on Human Rights (“ECHR”), the confiscation order had to be proportionate to the legislative objective of removing the fruits of crime. Proportionality was laid down as the correct principle to apply in preference to the previous judicial approach to POCA of examining whether, as a matter of discretion, there had been an abuse of process (see paras 18, 21 and 24).

(ii)              In a criminal lifestyle case, because of the assumptions as to the criminal source of assets that are required to be made under section 10 of POCA, it will be rare for a confiscation order to be disproportionate (para 25).

(iii)            In deciding on the amount of the confiscation order, the criminal is not entitled to set off against the benefit obtained the cost of committing the crime (eg a bribe paid to an official) because that would be to treat the criminal enterprise as if it were a legitimate business (para 26).

(iv)             As the focus of a confiscation order is on the value of the benefits obtained, it is irrelevant in assessing the value of the benefits that the benefits are no longer retained, as where money obtained by committing an offence has been spent (para 27).

(v)               It would be disproportionate to make a confiscation order where the criminal has wholly restored the benefit to the loser. That would constitute double recovery which would therefore go beyond confiscation and would constitute an unacceptable penalty (paras 28-29).

(vi)             There may be other cases of disproportionality analogous to that of goods or money being entirely restored to the loser. An example is where the defendant, by deception, induces someone else to trade with him or to employ him in a manner otherwise lawful and gives full value for goods or services obtained (para 34). This point bears directly on the facts of this case. It is therefore helpful to set out precisely what Lord Walker and Hughes LJ said in para 34:

“There may be other cases of disproportion analogous to that of goods or money entirely restored to the loser. That will have to be resolved case by case as the need arises. Such a case might include, for example, the defendant who, by deception, induces someone else to trade with him in a manner otherwise lawful, and who gives full value for goods or services obtained. He ought no doubt to be punished and, depending on the harm done and the culpability demonstrated, maybe severely, but whether a confiscation order is proportionate for any sum beyond profit made may need careful consideration. Counsel's submissions also touched very lightly on cases of employment obtained by deception, where it may well be that difficult questions of causation may arise, quite apart from any argument based upon disproportion. Those issues were not the subject of argument in this case and must await an appeal in which they directly arise…”

This case is, of course, one in which those issues directly arise." (R v. Andrewes [2022] UKSC 24)

Disproportionality proviso: general principles

- Burden on prosecution to show it would not be disproportionate to require D to pay recoverable amount

 

"[39] Although there appears to be no direct authority on the point, it is clear that, given the criminal context, the legal burden of proof in respect of the proviso in section 6(5) is on the prosecution. That is, it is for the prosecution to establish that it would not be disproportionate to require the defendant to pay the recoverable amount." (R v. Andrewes [2022] UKSC 24)

- Burden on prosecution to show it would not be disproportionate to require D to pay recoverable amount

No general principle against order requiring the sale of family home

 

"[35] We are not persuaded that the making of this order does amount to a violation of A1P1. In Parkinson the court did not accept that there is some "general principle" that where a confiscation order would require the sale of the family home a confiscation order will not, or at all events will not usually, be made. Davis LJ, delivering the judgment of the court, said:
"31. Overall, … we conclude that in confiscation proceedings of this kind, whilst a potential consequential forced sale of the family home is of course a matter to be taken into account, it is not to be taken as in principle some kind of trump card in resisting the making of a compensation order or a section13(6) direction, let alone with regard to the making of the confiscation order itself."
[36] Lord Justice Davis added:
"32. … We suggest that Crown Court Judges should nowadays be a little careful, in the course of confiscation or compensation proceedings, in not too readily assuming that the making of a compensation order in such circumstances inevitably will require a jointly owned property to be sold in order to realise the defendant's beneficial interest in such property. Commonly, no doubt, that may well be the consequence. But under modern jurisprudence there is at least some prospect, in an appropriate case, for a spouse or partner having the remaining beneficial share in the family home, and perhaps also where there are dependent young children, at least raising an opposing argument as to sale or possession: such arguments being potentially available in the course of enforcement proceedings in the courts which have been subsequently undertaken to realise the value of the defendant's beneficial interest. Such arguments in opposition are capable of placing reliance, in an appropriate case, on the considerations arising under article 8 of the Convention or on wider equitable principles. At all events, one can perhaps reflect that if the enforcing court in subsequent sale and possession proceedings does not consider it in any particular case to be unjust or disproportionate to order sale and possession, then that is suggestive of it not having been unjust or disproportionate to have made the original compensation order in the first place."
[37] These observations apply equally to the making of the confiscation order itself. We agree with the Recorder that the appropriate time for consideration of whether the house in which the Appellant and her husband live has to be sold is at the enforcement stage, if it be reached." (Reynolds v. R [2017] EWCA Crim 57)

- No general principle against order requiring the sale of family home
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