The Jersey courts consider legitimate tax avoidance and illegitimate tax evasion when seizing assets

Introduction

1.The Jersey Court to confiscate drug offender’s money after-tax evasion confession [08 August 2019]. A 57year-old convicted drug offender could see up of £33,804 of savings seized by Jersey authorities, despite successfully arguing that the money was not the proceeds of criminal activities – but admitting tax evasion in the process.

In the judgement,

The following was recoded about the court’s view about legitimate tax avoidance and illegal tax evasion.
1.The respondent HAS NOT satisfied the Court that the account was used for legitimate tax avoidance and not illegal tax evasion.
2.The respondent has not produced any of his tax returns, the clear implication being that the interest earnt on the Account was deliberately not disclosed to the Inland Revenue.
a)If that had occurred in Jersey, it would be an offence of either

i. Foster fraud or
ii. under Article137(1) of the Income Tax (Jersey) Law 1961.

b)It is conduct, therefore, which comes within the definition of “unlawful conduct”.

3. The fact that tax liabilities in the United Kingdom can be discharged without criminal sanction and the fact that there has been no criminal charge in the United Kingdom, in our view has no bearing on whether or not there is unlawful conduct as defined, which is concerned with transposing the conduct to Jersey.

4. We agree with Advocate Jowitt that the obvious inference from the respondent’s affidavit is that

a)the respondent paid monies into the Account as part of a dishonest scheme by which he under-declared the true amount of his income to the United Kingdom tax authorities, which would have involved him in filing tax returns which falsely under-stated his true income, and

b)that would be an offence under our law if it had occurred here.

c)The Account was used in, or intended to be used in, that unlawful conduct.

5.In short, his conduct means that the Account falls fully within the definition of tainted property in Article 2 of the Forfeiture of Assets Law.  This accords with English authority.

6.The case of Ahmed v HMRC (2013) EWHC 2241 (Admin) concerned a respondent who hid cash in his home as part of a scheme to under-declare takings from his company to the revenue.  Carr J said (at paragraph 37)

a)“It is sufficient to prove that the sum or part of it was part and parcel of a dishonest scheme to cheat the Revenue …”.
In addition, the courts said

7.“Further, we are not persuaded that a material distinction exists between traditional fraud and tax evasion by reason of any consideration that, in instances of tax evasion, the money is, in the first instance, ‘legitimately’ in the hands of the taxpayer.  As soon as a taxable event has occurred, the receipts in the hands of the taxpayer are receipts for which the taxpayer is bound to account to the revenue authorities.  False representations in respect of those receipts cause prejudice to the States (or the Revenue) and benefit to the taxpayer just as in the case of any other fraudulent activity (Michel v Attorney General 2016 JLR 287) at paragraph 16).”

8.The property in this case – the chose in action which is the balance at the Jersey bank – is thus both property obtained in the course of or in connection with unlawful conduct, and property used in or intended to be used in unlawful conduct and is thus tainted property;

9.Moreover, the respondent’s admissions amount to an admission that the property is criminal property within the definition in the Proceeds of Crime (Jersey) Law 1999,

a)such that any use by him of the property now would constitute the Jersey offence of money laundering and

b)would thus fulfil the 2018 Law definition of tainted property as property ‘intended to be used in unlawful conduct’.

10.The respondent on his own case cannot satisfy the Court that the property is not tainted property and the Court must accordingly make a forfeiture order in respect of it.

The judgement can be read here.

Read the original article here.