Revenue and Customs v Khawaja

This is an appeal by Her Majesty’s Revenue and Customs (“HMRC”) by way of Case Stated from a decision of the General Commissioners dated 30^th November 2005 concerning the affairs of Mr Khawaja, the taxpayer. Mr Khawaja had appealed to the Commissioners from an assessment to penalties dated 17^th November 2004. The appeal raises a question as to the standard of proof to be applied in such proceedings.

Mr Khawaja was the controlling director of Sahib Restaurant Limited, a company which, as its name suggests, ran a restaurant. He received remuneration from the restaurant and submitted tax returns for the years 1993/94 to 1998/99 in which he declared the amounts he had received for each of those years in respect of remuneration from the restaurant, benefits in kind and rental income. HMRC (in its then form) considered that he had under-declared his income and raised its own assessments, estimating the amounts it believed he had obtained. He appealed those assessments first to the General Commissioners and then to the High Court, and his appeal to the High Court was heard by Lawrence Collins J on 27^th November 2003. He reduced the income assessed under each of the heads, but left significant sums owing on the assessments. The total amount of the difference between the final amounts owing on the assessments and the original amounts of income declared by Mr Khawaja was £238,500. The difference in tax was £82,600 odd. They were assessments in respect of his remuneration, benefits in kind and income from the property from which the company traded and which was, apparently, owned by him.

In due course after the hearing before Lawrence Collins J, HMRC served a notice claiming penalties under s.95(1)(a) of the Taxes Management Act 1970 (“TMA”) for:

“negligently submitting incorrect returns under s.8 of that Act for the years [referred to above].”

The total of the penalties was £41,332, ranging from £2,084 in 1993/94 to £12,865 in 1998/99. Mr Khawaja then appealed that to the General Commissioners, resulting in the decision which is subject to this appeal. The Commissioners heard evidence and submissions and allowed the appeal in part. The Case Stated records their decision as follows:

“9.1

The penalty determination notice dated 17^th November 2004 is valid.

9.2

Applying the standard of proof beyond reasonable doubt, the Appellant has demonstrated that the Respondent negligently understated income in respect of the property and benefits in kind from his returns for the tax years in question.

9.3

Applying the standard of proof beyond reasonable doubt, the Appellant has not demonstrated that the Respondent negligently understated income in respect of remuneration from the restaurant for the tax years in question.”

They reduced the penalties to sums ranging from £900 in the first of the years in question to £1,200 in the last of them.

Lest there be any doubt as to the basis on which they decided the questions before them, the short written decision of the General Commissioners dated 30^th November 2005 says:

“On the facts we are satisfied beyond reasonable doubt that there was negligent submission of incorrect returns for the years mentioned above in respect of property income, but applying the same standard of proof we find that HMRC have failed to prove beyond reasonable doubt that there were understated profits.”

HMRC appeal that determination on the footing that the General Commissioners applied the incorrect standard of proof. HMRC say that they should have applied the civil standard of the balance of probabilities. That, shortly stated, is the principal issue arising.

This appeal has an unfortunate timing aspect to it. HMRC applied for a Case Stated within the time required, as, indeed, did Mr Khawaja. Unfortunately it then took a very considerable period of time to have the case finalised. The letter from HMRC requesting a case to be stated was dated 2^nd February 2006; the stated case was not issued until 6^th February 2008. The reasons for the delay were explained by the clerk to the General Commissioners, who accepted responsibility for the delay. It was attributed to a period of illness, a change of his employment from one firm of solicitors to another and to the difficulties the department had in recruiting staff. All that is pretty unimpressive but, to his credit, the clerk has not sought to shuffle off any of his personal responsibility for the delay.

The General Commissioners did not give any reason for their selection of the standard of proof. There is no indication in the Case Stated that there was any serious debate about it, though reference to the “criminal nature” of the proceedings was apparently made by Mr Khawaja’s representative. I therefore approach the point de novo (as far as this case is concerned). Mr T Hirst, who appeared for Mr Khawaja, supported the stance taken by the General Commissioners. He relied principally on three points or matters – the Scottish case of Inland Revenue v Ruffle [1979] SC 371, which in terms seems to say that the criminal standard applies; second he relied on the application of Article 6 of the European Convention of Human Rights as enacted by the Human Rights Act 1998 (“HRA”); and third he relied on the proposition that the proceedings should be treated as quasi-criminal so as to attract a criminal standard of proof. In truth, these points are all analytically related. Mr A Tolley, who appeared for HMRC, said that the civil standard applied, distinguishing Ruffle and relying on an analysis extending across some VAT cases and other cases dealing with the standard of proof and the suggestion that there might be a heightened standard of proof in some civil cases.

I think that a convenient analysis would be to consider first of all whether English domestic law, independently of the HRA, requires that the criminal standard of proof be applied to the penalty proceedings in this case. If it does, then there is little or nothing in the HRA to affect it. It can hardly be said (and it was not said in the case before me) that the HRA reduces the standard of proof. If it is the case that English domestic law, without the HRA, requires merely the civil standard of proof, then it becomes necessary to consider Mr Hirst’s point that the HRA applies so as to change that. I shall therefore consider the application of English domestic law first.

The question of standard of proof has received recent attention from the House of Lords. In two cases, decisions in each of which were delivered on the same day (11^th June 2008) their Lordships considered the question of standard of proof, in the context of the release of prisoners subject to life sentences in Northern Ireland (In re Doherty [2008] UK HL 33) and care proceedings (In re B (Children)(FC) [2008] UK HL 35). Those cases make it clear that there are but two standards of proof – the civil and the criminal. They make it clear that, insofar as it might have been suggested that there was some intermediate standard, that intermediate standard did not exist. In In re B at paragraph 13, Lord Hoffman said:

“I think that the time has come to say, once and for all, that there is only one civil standard of proof and that is proof that the fact in issue more probably occurred than not.”

He referred to a confusion which might have arisen in the cases to the effect that this standard of proof might vary:

“5.

Some confusion has however been caused by dicta which suggest that the standard of proof may vary with the gravity of the misconduct alleged or even of the seriousness of the consequences for the person concerned. The cases in which such statements have been made fall into three categories. First there are cases in which the court has for one purpose classified the proceedings as civil (for example, for the purposes of Article 6 of the European Convention), but nevertheless thought that, because of the serious consequences of the proceedings, the criminal standard of proof or something like it should be applied. Secondly, there are cases in which it has been observed that when some event is inherently improbable, strong evidence may be needed to persuade a Tribunal that it more probably happened than not. Thirdly, there are cases in which judges are simply confused about whether they are talking about the standard of proof or about the role of inherent probabilities in deciding whether the burden of proving a fact to a given standard has been discharged.”

It was in that context that he said what I have quoted him as having said in paragraph 13. He went on in paragraph 13 to agree with Lord Steyn in R (McCann) v Crown Court at Manchester [2003] 1 AC 787 to the effect that:

“Clarity would be greatly enhanced if the courts said simply that although proceedings [in the first category] were civil, the nature of the particular issue involved make it appropriate to apply the criminal standard.”

Baroness Hale also referred to cases in that first category.

“69.

There are some proceedings, though civil in form, whose nature is such that it is appropriate to apply the criminal standard of proof. Divorce proceedings in the olden days of the matrimonial ‘offence’ may have been another example… But care proceedings are not of that nature. They are not there to punish or deter anyone. The consequences of breaking a care order are not penal. Care proceedings are there to protect a child from harm. The consequences for the child of getting it wrong are equally serious either way.

70.

My Lords, for that reason I would go further and announce loud and clear that the standard of proof in finding the facts necessary to establish the threshold under s.31(2) or the welfare considerations in s.1 of the 1989 Act is the simple balance of probabilities, neither more nor less. Neither the seriousness of the allegation nor the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts. The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies.”

Those citations make it clear that there are categories of case which, though technically civil, are capable of attracting the criminal standard of proof. In re Doherty provides some examples. Lord Brown said:

“47….. [the serious adverse consequences of a decision] goes to the standard of proof to be applied in the first place. It is because of the serious consequences of criminal convictions or adverse disciplinary findings that the criminal standard of proof – proof beyond reasonable doubt – is required in those cases.”

He then refers to a number of what he called “quasi-criminal cases”:

“B v the Chief Constable of the Avon and Somerset Constabulary [2001] 1 WLR 340, a Divisional Court decision concerning the making of sex-offender orders; Gough v the Chief Constable of the Derbyshire Constabulary [2002] QB 1213, a decision of the Court of Appeal regarding the making of football banning orders; and R (on the application of McCann) v The Crown Court of Manchester [2003] 1 A 787, a decision of Your Lordships’ House on the making of anti-social behaviour orders…..Given, however, the conclusion in those cases that the standard of proof there being set was ‘for all practical purposes indistinguishable from the criminal standard’ (…in B, ‘An exacting standard of proof….in practice…hard to distinguish from the criminal standard’; in Gough ‘virtually indistinguishable’ from the criminal standard so that ‘pragmatism dictates that the task of magistrates should be made more straightforward by ruling that they must in all cases…apply the criminal standard’ (Lord Steyn at para 37 in McCann…)) I question whether it would not have been more logical and appropriate to have decided that the making of the various orders calls for the criminal standard of proof to be satisfied in the first place.”

It is necessary for me to decide whether an appeal to the General Commissioners in relation to income tax penalty proceedings falls into that category.

A starting point for such a consideration must, of course, be the statute itself. TMA s.95 is headed “Incorrect return or accounts for income tax or capital gains tax” and subsection (1) reads as follows:

“95(1) Where a person fraudulently or negligently –

(a)

delivers any incorrect return of a kind mentioned in s.8 or s.8A of this Act….or

(b)

makes any incorrect return, statement or declaration in connection with any claim for an allowance, deduction or relief in respect of income tax or capital gains tax; or

(c)

submits to an inspector of the Board or any Commissioners any incorrect accounts in connection with the ascertainment of his liability to income tax or capital gains tax

he shall be liable to a penalty not exceeding the amount of the difference specified in subsection (2) below.”

The amount specified is, in essence, the amount of the unpaid tax. There is nothing express in that section, or indeed anywhere else in the Act, which makes it clear what the standard of proof is on any challenge to an assessment to such a penalty; nor does there appear to be anything implicit elsewhere in the Act. To that extent, as will appear later, the income tax legislation differs from the VAT legislation. Accordingly, having said that the Act provides a starting point, it does not help very much. The matter must be decided using principles acquired from elsewhere.

A useful starting point is paragraph 37 of the speech of Lord Steyn in the McCann case:

“37.

Having concluded that the relevant proceedings are civil, in principle it follows that the standard of proof ordinarily applicable in civil proceedings, namely the balance of probabilities, should apply.”

That sets out a useful jumping off point for the analysis. Are the proceedings in cases such as the present civil, as opposed to criminal? In my view there can be no doubt about that. They are civil. They are in complete distinction to parallel criminal proceedings which can be brought for fraudulent tax evasion, and they cover ground (negligence) which could never sensibly be the subject of criminal proceedings in cases such as this. Although the word “penalty” is used, that is far from determinative. The penalties are first raised by a notice issued by HMRC. There are only ever any proceedings if that notice is challenged (as was the case in respect of Mr Khawaja’s notice). That is not a criminal-type procedure. This is plainly a procedure allied to a civil recovery procedure. There is nothing criminal about it. That, therefore, gives us the starting point of a presumed civil standard of proof.

However, as the cases above indicate, that is but a starting point. There are cases in which the consequences are so serious, or the nature of the claim is such, that the imposition of a criminal standard of proof is required. There is no binding authority directly in point in relation to income tax penalties, but there are pointers elsewhere in the authorities.

The first authority is one which favours Mr Hirst’s case. It is the case already mentioned of Inland Revenue v Ruffle. That was a case involving the raising of a penalty under TMA s.99 –

“Any person who assists in or induces the making or delivery for any purposes of tax of any return or account which he knows to be incorrect shall be liable to a penalty not exceeding £500.”

The Commissioners of Inland Revenue sought to recover a penalty from the defendant in that case. They failed because on the facts it was not established that the accounts which the defendant assisted in drawing were “for any purposes of tax”. They were for the purposes of preparing a company’s accounts. In the course of his judgment, Lord Jauncey, sitting in the Outer House, said (at page 377):

“Section 99 is one of a number of sections to be found in Part X of the Taxes Management Act 1970 headed ‘Penalties etc’. As a penal section it falls to be construed strictly and the proceedings thereunder being of a quasi-criminal nature proof of the facts resulting in liability to a penalty must be beyond reasonable doubt.”

That seems to be a plain statement. It is unreasoned, and it is not at all clear from the report that the point was the subject of any argument. What is clear is that the finding was not necessary for his decision. At page 378 he set out some of his findings:

“In the present case there is no doubt that the use for tax purposes of the statutory and detailed accounts was an incidental consequence of the making of the accounts known to the defender, but there is equally no doubt that it was neither the purpose nor a purpose of such making.”

He was thus not basing his decision on a failure to come up to the standard of proving the purpose beyond reasonable doubt; he actually found that there was no doubt the other way – in other words, no doubt at all that one of the statutory conditions was not met. There would have been precisely the same result had the standard of proof been the balance of probabilities. In those circumstances, the case is, with respect, of questionable authority.

Its authority was called into question by the Inner House in 1^st Indian Cavalry Club Limited v Customs and Excise Commissioners [1998] STC 294. That case concerned penalties under the VAT regime. The relevant provision in question provided for a penalty in the case of dishonesty (but not in the case of negligence). As is apparent from other English authorities, there are pointers in the VAT legislation itself, which do not exist in the TMA, which point away from the criminal standard and towards the civil standard. In the light of that, the judges in that case concluded that there were two separate schemes, civil and criminal, and the civil standard of proof applied. In those circumstances their Lordships did not have to deal with the Ruffle case, but they all had something to say about it. Lord McCluskey said:

“I do not find it necessary to express any concluded view as to the observations by Lord Jauncey in Ruffle in the context of applying s.99 of the Taxes Management Act 1970. It is difficult to reconcile what Lord Jauncey said with the views expressed by the Keith committee dealing with the same subject matter.”

I will refer below to the Keith committee. Lord Hamilton said:

“I reserve my opinion as to the correctness of the view expressed by Lord Jauncey in Inland Revenue v Ruffle….as to the standard of proof applicable in proceedings under s.99 of the Taxes Management Act 1970. For policy or other reasons his Lordship may not have been afforded a full argument on that aspect of the case.”

Lord Johnston said:

“Finally, reference was made both before the Tribunal and before this court to the decision of Lord Jauncey in Inland Revenue v Ruffle…In the context of this case I attach no importance to that decision which in any event seems to me, in regard to the issue of standard of proof, to have proceeded upon a concession or at least without the point being argued. It is sufficient for present purposes to state the obvious, namely that we are concerned with different legislation in a different context.”

Those points cast serious doubt on the force which should be given to Ruffle. I share the doubts expressed by those Scottish judges. A further consideration of the authorities increases those doubts.

The point has not been the subject of any consideration in any English case that I was shown relating to income tax. However, it has been considered in the context of VAT. A decision of the VAT Tribunal in Patel v Commissioners of Customs and Excise 16^th May 2001 (decision no. 17248) says in terms in paragraph 79:

“The fact that the proceedings are criminal for the purposes of the Human Rights Convention does not mean that the standard of proof in domestic criminal proceedings applies. The standard is the civil standard of the balance of probabilities….”

That, however, is as bold and unreasoned a statement as the statement to the contrary in Ruffle. It is also in the context of a different taxing statute. However, more assistance is obtained from another VAT case, namely Han v Customs and Excise Commissioners [2001] 1 WLR 2253. The principal point in that case was whether the system for VAT penalties meant that that system gave rise to “criminal charges” within Article 6. The Court of Appeal, by a majority, held that it did. In the course of his judgment Potter LJ set out the relevant provision – section 60 of the Value Added Tax Act 1994 (see paragraph 12). At the end of that citation he said:

“(The burden of proof is that applicable to civil proceedings, namely proof on the balance of probabilities: see 1^st Indian Cavalry Club Limited v Customs and Excise Commissioners 1998 SC 126).”

Again, it is not apparent that the point was the subject of any argument, but what is significant is that Potter LJ had no apparent difficulty with that proposition in the context of the VAT penalty regime.

Of more direct significance is the reference in that case to the Keith Report (1983, Cmnd 8822). It was pursuant to this report that the VAT penalty code was introduced. By then the income tax penalty regime had been in existence for some time. At the time of the report there was no parallel civil penalty code for VAT, the only sanction for fraudulent or reckless actions being criminal sanctions. As Potter LJ observed:

“39.

The Keith Report noted this position. Such arrangements were contrasted with those available to the Inland Revenue in respect of tax, where civil penalties were provided, both for regulatory matters and with a wide range of offences, such as neglect and fraud, on proof to the civil standard.” [my emphasis]

He then quoted various parts of the Keith Report, including the following in paragraph 18.3.7:

“Turning to the question of the introduction of penalties for civil fraud, to run in parallel with and the bringing and compounding of criminal proceedings, Customs and Excise told us that to run the two systems together would undoubtedly give much greater flexibility in dealing with fraud or near fraud. It would afford welcome assistance in dealing with those cases where there were indications of fraud but where it was not possible to obtain proof to the criminal standard. At present those cases finished as simple unpenalised assessments and represented a loss to the Exchequer in delayed receipt of tax and cost of investigation.”

At paragraph 43 Potter LJ remarked on the findings of the Keith Report about the difficulties of having to prove penalty cases to the criminal standard:

“43.

So far as fraud and dishonesty were concerned, the report noted at p.398 para 18.4.11 that the requirement that fraud had to be provable to the criminal standard before penalties could be exacted meant that many large understatements arising through demonstrable lack of care, but short of fraud, provable to that standard, went unpenalised. It continued, at p.399 – 400 para 18.4.16:

‘We have noted…the high resource cost of the investigation of fraud to the criminal standard, and the understandable constraints this imposes on the investigation of the smaller frauds….by comparison, the Inland Revenue offence code providing civil penalties for fraud, buttressed by inducement provisions, allows a “civil” form of investigation and settlement, with the burden of criminal investigation being taken up only in those cases identified from the outset or in their course as sufficiently heinous to justify prosecution. In those cases where “civil” investigation techniques suffice to secure evidence of the true extent of the fraud, the process is an economical one, at least by comparison with the cost of a comparable criminal investigation. The investigation of acts of dishonesty in relation to tax matters in a “civil” style reinforced by inducements, rather than as criminal offences under the Judges’ Rules was generally welcome to our witnesses and we heard no consistent body of criticism of the lower civil burden of proof in such cases as being unfair to the tax payer.’” [my emphasis]

It is plain from those citations that the Keith Report assumed that a civil penalty system for dishonesty in relation to income tax required proof only to the civil standard. It was on the basis of that that the VAT penalty code was recommended, with proof to the same standard. It is apparent that Potter LJ did not demur from the assumption made in the Keith Report, though to be fair the point was not germane to the decision he had to take. In my view, the assumptions made by the Keith Report, unchallenged by anyone, give strong support to the submission that the civil standard of proof would be applicable to dishonesty cases under the income tax regime, and a fortiori to negligence cases such as the present.

The Keith Report had also been before the Inner House in the 1^st Indian Cavalry Club case where the standard of proof was plainly in issue. Having referred to it as the genesis of the VAT penalty scheme, and having considered the wording of the statute, the finding of the Inner House in that case was, in the words of Lord McCluskey:

“In my opinion, the whole scheme of Part IV is to enact two distinct and separate schemes. In the one, civil proceedings allow the recovery of civil penalties (including surcharges). In the other, persons may be prosecuted for the offence of ‘fraudulent evasion of VAT’ (see s.72). s.60 falls within the civil regime and thus gives rise to civil proceedings which, in my opinion, attract the civil standard of proof.” [my emphasis]

He clearly understood that the Keith Report was recommending a lesser standard of proof than the criminal standard, though he does not quite say so in terms. He says:

“In my opinion, the mischief identified by the Keith Committee, and in respect of which they made recommendations for the introduction of a civil fraud, was the mischief of having to resort to criminal proceedings and sanctions in respect of a whole range of failures by the taxable person to perform his obligations to make due returns or appropriate payments etc. The remedy was to provide a civil regime in respect of liabilities arising from defaults which were less serious, while leaving open the possibility of a prosecution where the conduct was sufficiently serious. This consideration also points in favour of the result arrived at by the Tribunal.”

The result arrived at by the Tribunal was to find that the civil standard of proof applied.

Lord Hamilton also referred to the Report. He says:

“That Report points to the undesirability of penalising defaults through a purely criminal offence code. That mischief is recommended to be cured by the introduction of a code for the recovery of certain penalties by civil process. The Report acknowledges (correctly in my view) that any civil process would carry with it the civil standard of proof.”

Again, therefore, albeit in the context of a case dealing with the VAT code, there is a clear reference to the appropriateness of the civil standard, and a clear acknowledgement of the correctness in the Keith Report in assuming that that standard applied in income tax cases.

The Keith Report reappeared in Khan v HM Revenue and Customs [2006] EWCA Civ 89. Yet again, that was a VAT case and penalties for fraudulent evasion were again in issue. The issues in the case were described by Carnwath LJ at paragraph 23 as including:

“….(iii) burden and standard of proof.”

In fact, paragraph 78 reveals that counsel for the taxpayer conceded that the civil standard of proof applied, so that particular point was not argued. However, paragraph 9 of his judgment refers back to the judgment of the judge at first instance (Hart J) who himself referred to the Keith Report:

“The genesis of the code is to be found in the 1983 Keith Report. That had reported on the desirability of introducing into the VAT enforcement regime a civil penalty system akin to that available to the Inland Revenue in respect of other taxes….”

There was implicit approval of the statement of Hart J. It equates the two systems.

What one therefore gets out of these VAT cases is as follows. First, their tenor is that the civil standard of proof applies to the system of VAT penalties. It is true that the statutory context is different, and that additional arguments can be made on the wording of the VAT statutes than are available in relation to the income tax regime. However, I do not think that that makes a material difference. The apparent intention of the legislature was to provide something within the VAT regime which was parallel to the income tax regime. In that context, it was plainly assumed that the civil standard of proof applied to the income tax regime, and the VAT scheme was mimicking that. This is notwithstanding the fact that the VAT regime is confined to fraud, and negligence is not sufficient. If the civil standard applies in relation to civil fraud so far as VAT is concerned, then there is no reason in principle why it should not apply to such matters in relation to income tax (note the word “fraudulently” in s.95), and negligence is then an a fortiori case. Mr Hirst urged on me that the factual context of the VAT legislation was different from that in relation to income tax. He said that in relation to VAT there was wide scale evasion. He invited me to find that that was the case, or to take judicial notice of it, and somehow to take judicial notice of the fact that there was less of a problem in relation to income tax. I am afraid I decline to do so. I am sure that whatever the numbers might be in relation to the two taxes, the stamping out of evasion in both is equally desirable. It is apparent that parallel regimes have been put into place, albeit with different wording, in the various statutes, and it seems to me to be sensible that the same standard of proof should apply. For the reasons given in the Keith Report and referred to in the cases, that standard should be the civil standard.

Mr Hirst urged on me that as a matter of principle this is one of those cases, like contempt of court and other cases, where the nature of the claim (a penalty) and the consequences (something which is not compensatory but which is intended to discourage and deter, and perhaps to some extent punish) was such that the case fell into the sort of category in which the criminal standard of proof was appropriate in line with Lord Hoffman’s first category in In re B. I do not accept that submission. It is true that the fact that a sanction has penalty consequences, and is therefore penal, is a factor that might lead to the criminal standard of proof – see Baroness Hale in In re B at paragraph 69. However, I find the reasoning set out in the Keith Report to be more compelling. There are good reasons why Parliament enacted a set of provisions with the civil standard of proof in this context. The Inner House in 1^st Indian Cavalry Club indicated that using the label “penalty” was not sufficient to require the criminal standard of proof. I agree with that decision. Nor do I accept Mr Hirst’s submissions that the nature of the allegations was such that this was a dishonesty case attracting the criminal standard. First, that is not the true nature of the case, and even if it were, the civil standard would still apply – see above.

That being the case, it is necessary to consider whether the position is changed by the enactment of the HRA.

HMRC accepts that, in the light of authority, proceedings for penalties of the kind which are in issue in this case, are criminal proceedings for the purposes of Article 6. That means that certain specific procedural safeguards apply. However, the standard of proof is not dealt with by Article 6. It is quite plain from the decision in Han that one does not move seamlessly from a determination that proceedings are criminal for the purposes of Article 6 to introducing all the domestic law consequences of proceedings being criminal. Mance LJ made this plain:

“88.

The classification of a case as criminal for the purposes of article 6(3) of the Convention on Human Rights, using the tests established by the Strasbourg jurisprudence, is a classification for the purposes of the Convention only. It entitles the defendant to the safeguards provided expressly or by implication by that article. It does not make the case criminal for all domestic purposes. In particular, it does not necessarily engage protections such as those provided by the Police and Criminal Evidence Act 1984. The submissions before us did not address this point or, indeed, the subject of burden of proof (although I note that no objection was even raised to a civil burden in Georgiou’s case). As Mr Oliver and Potter LJ have both observed, the precise implications under the Convention of classification of any case as criminal for the purposes of the Convention will have to be worked out on a case by case basis.”

I would respectfully venture to suggest that the reference to burden of proof in Mance LJ’s judgment should be a reference to standard of proof. If that it is right then it is plain that he did not consider that the classification automatically brought in the criminal standard of proof. The reference to what Potter LJ had said is a reference to his judgment at page 84.

In those circumstances it is plain that Article 6 does not automatically introduce the criminal standard of proof. If it is to be introduced there must be separate reasons for doing so. None have been identified. Accordingly, this provision does not help Mr Khawaja.

It is plain that the General Commissioners in this case considered the case on the criminal standard of proof. They erred in doing so. Prima facie the right course of action in the light of that finding is that the case should be remitted for them to consider it on the basis of the correct standard of proof. However, Mr Hirst said I should not do that. He relied on what he described on the “age of the issue to be decided”. The range of years in respect of which the penalty was assessed appears above. In order to assess the undeclared income, the Inland Revenue had taken the year 1995/96 and made some assumptions, and then applied its reasoning from that outward to the other years. The hearing before the General Commissioners on the main appeal on the assessments took place in June 2001. The appeal in front of Lawrence Collins J took place in November 2003. The penalty notice was issued in November 2004, and the penalty hearing took place in September 2005. The case stated was not (for the reasons appearing above) produced until February 2008. That timetable, said Mr Hirst, made it undesirable and unfair to remit the matter to the Commissioners. I do not agree with him. This matter arose out of his client’s failure to declare income properly for a range of years. There was no suggestion that the Inland Revenue delayed unreasonably in making its assessment. Thereafter, much of the time that has been taken in dealing with this matter arises from appeals by his client which were only partially successful. It is true that about two years were lost because of the defaults of the clerk to the Commissioners. Neither party can be blamed for that. However, it is not, in my view, a reason for not remitting the matter so that it can be heard on the basis of a proper standard of proof.

There was some debate before me as to whether the hearing would more appropriately be a complete rehearing of the relevant issue or whether it would be a reconsideration of all the evidence by the Commissioners. If it were to be the latter, then there might be a problem. One of the Commissioners has now retired. It is not apparent that he would be available to re-participate in a further consideration of the evidence that was given. There is also the additional complication of whether the Inland Revenue would wish to adduce more evidence. As I understand it, the Inland Revenue produced little evidence beyond the decision of Lawrence Collins LJ in the appeal. Mr Khawaja takes, and took, the point that that evidence was not sufficient; the Inland Revenue ought to prove its case again properly. Mr Hirst was anxious that the Inland Revenue should not now have a further chance to get its evidential case in what might be thought to be better order, to the potential detriment of his client. He sought to invoke the doctrine of estoppel against HMRC so as to prevent it advancing a better case, but he did not identify the nature of any such estoppel and I cannot imagine what sort of estoppel it might be. Mr Tolley told me that in fact it was the intention of the Inland Revenue to adduce no additional evidence beyond that which they had adduced at the hearing before the General Commissioners. I do not propose to get involved in that debate. The appropriate course is, in my view, to remit the matter to the General Commissioners. What happens there will depend on what the parties state they intend to do, and what the General Commissioners rule it is proper for them to do, though I note what Mr Tolley said about his client’s intentions in this respect.

In the circumstances I shall allow the appeal and remit the matter to the General Commissioners for a further hearing of the matter which they found not proved to the criminal standard. There need be no hearing of the matter which they found proved to that standard.

I have described this as a cross-appeal. There is considerable doubt as to whether or not there is a proper cross-appeal before me. Mr Khawaja, through Mr Hirst, presented a complicated argument intended to show that the amounts assessed in respect of the penalties was somehow out of proportion. If one took certain figures from the assessments, made adjustments in accordance with the judgment of Lawrence Collins J, looked at the penalty assessment notice and then did some apportioning in the light of all that, it was said that the penalties assessed by the General Commissioners were somehow excessive. It was extremely hard to follow this argument. It depended on a number of assumptions about Lawrence Collins J’s judgment, and then depended even more on certain assumptions as to what the General Commissioners might have thought and determined. They did not reason the penalties that they determined to be applicable for each of the six years in question. Without knowing why they came to their various figures, it is in practice impossible to deal with what Mr Khawaja seeks to raise in terms of his appeal.

The blame for this lies with Mr Khawaja. In a letter dated 7^th February 2006, he formally requested the clerk to the General Commissioners for a case to be stated. That was in time. Thereafter, his representative (Mr Wheeler) participated in the settling of the case. At no stage did he do sufficient to seek any clarification in that case as to the thought processes of the General Commissioners when they came to assess the penalties applicable to each year. I therefore do not know what that thought process was. In a letter dated 22^nd December 2006 he sought to raise the question of “whether or not the Commissioners were entitled on the evidence to determine the penalties to be imposed in respect of negligently understated income in respect of property at the levels given in their decision or as to whether the penalty assessment should have been remitted in its entirety on the basis that there was insufficient evidence upon which to make any determination at all”, but that seems to be a different point, and all very oblique. In those circumstances, when Mr Khawaja has had a chance to make sure that the relevant material is before this court, and has failed to take it, I do not think he can be allowed to raise this point as a matter of appeal, or if he can then the appeal should fail. I so determine. The point remained relatively obscure until the skeleton arguments in this case, and in fact it was only during oral argument that any details at all began to emerge. Even then, the matter remained difficult to grasp.

In the circumstances, if Mr Khawaja has actually managed to raise this point as a matter of cross-appeal, I dismiss that cross-appeal.

It follows that I allow the appeal in this case and remit the relevant issue to the General Commissioners for rehearing, and I dismiss Mr Khawaja’s cross-appeal or attempted cross-appeal.