Author: By Robert Verkaik, Law Editor and Lewis Smith
Revenue and Customs officials are re-examining about 4,000 cases where confiscation orders were granted to seize the assets of people involved in the illicit trade in cigarettes. The agencies face having to pay it all back, plus legal costs and compensation, after failing to notice a change in the law in 2001 which severely restricted who could be targeted for such smuggling.
Since 2005, Customs officers have won 1,840 confiscation orders and recovered £88.6m of tobacco smuggling assets. It is not yet known how much of this will have to be returned. Yesterday, Her Majesty’s Revenue and Customs (HMRC) confirmed it was conducting an urgent review of 4,000 defendants convicted of tobacco smuggling.
The HMRC prosecutions office said: “To date we have reviewed 711 defendants’ cases. Of these, we have written to 35 defendants as part of the second stage of the review [those cases where the law has been wrongly applied]. A further 13 convicted defendants have contacted us on learning of the review and we are corresponding with them. By a process of extrapolation from the number of tobacco cases recorded, we project there are a further 3,300 individual defendants’ cases to be reviewed.”
The blunder first came to light at a court hearing last year when one of HMRC’s lawyers realised the statute on who was liable to pay excise duty in tobacco smuggling cases had been changed seven years before. Instead of everyone involved in the crime ? whether smuggling tobacco into the UK, transporting it to vendors or selling it ? being required to pay tax, the change meant only the masterminds and those who smuggled it would have to pay the duty.
Don Mavin, a tax consultant, is representing two defendants who believe money was wrongly confiscated from them by Customs officers. He said the ramifications of the review could last years, adding: “Some of these people may have have been bankrupted or forced to sell their homes. Many will be considering compensation claims.”
His colleague, Mark Taylor, said: “Obviously it’s embarrassing for HMRC. It’s a mess, a real mess. There is no excuse, whatever way you look at it.”
Paul Holmes, the Liberal Democrat home affairs spokesman, described the affair as “a complete farce” and added: “It is staggering to think that not only have people been jailed and lost their homes because of a law that no longer exists, but millions of pounds could end up being paid back to low-level criminals because of sheer incompetence.”
The so-called Chambers Review was ordered after the Court of Appeal overturned a £66,000 confiscation order handed to William Chambers, who was caught at a Kent garage where 600kg of illicit tobacco was being held. Mr Chambers admitted knowing it was smuggled but denied bringing it into Britain from Belgium. The confiscation order was withdrawn after an HMRC lawyer realised Mr Chambers was exempted by the 2001 legal change.
Lord Justice Toulson, sitting with Mr Justice Griffith Williams and His Honour Judge Brodrick, said the case raised questions of “substantial constitutional importance” because of the difficulty even for courts to be aware of the law.
Since then, three men who played a small part in distributing hundreds of thousands of smuggled cigarettes have successfully appealed against confiscation orders. Robert Khan, Frank Lockett and Daniel Carrington were each told by Chelmsford Crown Court to pay £35,063 in lost excise duty but the Court of Appeal quashed the charges in April.
Nan Mousley, a solicitor who represented a defendant who successfully challenged a confiscation order for £35,000, said: “Others may have suffered great personal hardship. People have served time in prison.”
The Revenue and Customs Prosecutions Office said in a statement yesterday: “Whilst the error is deeply regrettable we were not alone in making it: the same error has been made in academic texts and by practitioners at all levels.”
Customs in the dock: The litany of errors
2002 A High Court judge called for whole-scale reform of Customs after a series of trials linked to evasion of £600m of alcohol duty ? involving dozens of people ? collapsed. The most high-profile failure was at Liverpool Crown Court, where 15 defendants had been accused of evading £84m duty.
2003 Customs was stripped of its authority to carry out prosecutions following a series of high-profile court blunders. Responsibility was transferred to a new, independent body.
2005 Five businessmen accused of evading £120m in VAT on mobile phones were cleared when a judge ruled that Customs had lied to a court and failed to disclose vital evidence. Costing £65m, it was dubbed Britain’s most expensive fraud case collapse. A month earlier, a trial of eight people in London collapsed. They had been accused of VAT fraud while importing computer chips.
2009 Customs officials were branded “incompetent and negligent” by a judge at Bradford Crown Court when attempts to confiscate the £4.4m assets of a drug-trafficking ringleader collapsed because they had taken too long to provide the necessary details to the court.
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