Assessment and notification of an excise civil evasion penalty: time limits for assessment and notification of penalties
Time limits for S8 penalties
FA94 does not prescribe any time limits by which S8 penalties for the evasion of excise duty must be notified.
HMRC policy is that S8 penalties must not be notified more than:
- 20 years after the conduct giving rise to the penalty has ceased
- two years after there has come to knowledge of HMRC evidence of facts sufficient in the opinion of HMRC to justify notifying a penalty.
This policy reflects the fact that a civil evasion penalty is equivalent to a criminal matter for the purposes of Article 6 of the European Convention on Human Rights (ECHR). [See Court of Appeal judgment in Han & Yau v CCE (2001]. The time limits HMRC follow are therefore the same as the equivalent civil evasion penalty for customs matters - FA2003 S31 refers.
Article 6(1) European Convention on Human Rights
Article 6 (1) ECHR: Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
The rights afforded by Article 6 (1) apply at the point a ‘criminal charge’ is made against someone. In the normal run of cases the penalty assessment will constitute the charge.
It was established in the case of Eckle v Germany (1982): A ‘Charge’, for the purposes of Article 6(1), may be defined as: ‘the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence,’ a definition that also corresponds to the test whether ‘the situation of the [suspect] has been substantially affected’.
The House of Lords has held (Attorney General’s Reference No. 2 of 2001  ), following the definition given above in Eckle that in England and Wales formal charge or summons, rather than arrest or interview under caution, will normally be the significant point in time for the purposes of Article 6. However this is not a fixed rule, it will depend on the circumstances of the case. The House of Lords was influenced in its view by the fact that Code C, made pursuant to S.66 of the Police and Criminal Evidence Act, requires a detained person to be charged as soon as there is sufficient evidence to justify it. There is no question, if the Code is observed, of there being an improper delay between arrest and charge.
The civil evasion procedures do not involve arrest or interview under formal caution. Those under suspicion may be aware (often are aware) that the Commissioners have concerns about the accuracy of tax claims/declarations. They may be invited to answer questions. They may eventually be invited to make admissions and cooperate further in the investigation with a view to reducing their liability to a penalty.
In the case of King v United Kingdom (2004) which concerned a civil investigation of suspected tax irregularities it was established that proceedings can be said to start when official notification is given to an individual by the competent authority that there are reasonable grounds to suspect an offence. This would be at the point the applicant is handed, for example, Code of Practice 9 (2005) ‘Civil investigation into cases of suspected fraud’, as they are told at this point that HMRC is investigating them in relation to a suspected fraud.
Even though the applicant may not have been formally charged with a specific offence (for example, no penalty notice raised), the applicant may claim to have been put on formal notice that he is at risk of serious consequences. Therefore the rights that would apply between (for example) the point of arrest and the point of charge are brought into play by the issue of the Code of Practice, though the point of charge would be when the penalty notice is issued.
Determining whether the time taken by the proceedings was reasonable
When determining the duration of an undue delay in having a matter heard, generally, there is no fixed period of time beyond which a delay becomes unreasonable. The European Court of Human Rights in cases such as H v United Kingdom (1987) have repeatedly endorsed the following formula to be applied in determining whether the time taken by the proceedings was reasonable:
‘the reasonableness of the length of proceedings must be assessed in the light of the circumstances of the case and with reference to the following criteria: the complexity of the case, the conduct of the applicants and the relevant authorities and what was at stake for the applicants in the dispute’
In the case of K H MU & C B MU v Customs & Excise  VTD 17504 a 20 month delay between the issue of an assessment for tax arrears and the issue of an assessment for the civil evasion penalty was deemed acceptable. The delay represented legitimate time taken to investigate whether tax arrears uncovered were due to dishonest behaviour.