R v Steed opens up “hornets nest” regarding tax evasion and confiscation orders
A worrying legal precedent set in February has opened the door for those who fail to notify HMRC to face more serious sanctions under the Proceeds of Crime Act 2002.
The Court of Appeal upheld the verdict against small-time tax cheat Gareth Edward Steed who was hit with confiscation proceedings for more than £700,000 and the threat of a four-year prison sentence.
The Crown Court judge originally described Steed’s activities as “moonlighting” – legitimate trading which he failed to declare for tax.
Steed received no tax returns and failed to notify HMRC of chargeability to tax. Following investigation he was eventually charged as a common-law “cheat”, in that between 1st April 2003 and 31st December 2004 he failed to “submit declarations of tax due including the proceeds derived from the sale of vehicles, furniture and tools together with that from building work.
Steed pleaded guilty and accepted that a tax liability of at least £3,558 had arisen for 2002/03 which had escaped self-assessment.
However this was not the end of the matter as the guilty plea to the tax charge set in train a process that resulted in a Proceeds of Crime Act confiscation order for the vastly superior sum of £707,200.
A “balance of probabilities” finding was made that the appellant had realised funds from wider criminal activity including money laundering, drug dealing and benefit fraud.
The Crown Court judge found that Steed was unable to produce any evidence to the rebut the assumptions and made the confiscation order – Steed’s “available amount” – with a four year prison sentence in default of payment by the due date.
Steed appealed but the case was dismissed by the Court of Appeal.
Experts say the case has opened up a “hornets nest” in relation to dealings with HMRC and the wider issue of orders under the Proceeds of Crime Act.
It is understood that a number of agencies are adopting PoCA criminal confiscation orders and that very often defendant business or its lawyers may leave it too late to take expert advice from forensic accountants who have experience of such cases.
