NUFC v HMRC: the right to retain seized material clarified

NUFC v HMRC: Introduction

After being battered by the mighty Toffees (#UTFT) last night, we’re left wondering who has had the worst week or so: Kieran Trippier after his brace of howlers or the legal team of Newcastle United (“NUFC”).

Yes, as November turned into December, the Administrative Court delivered a significant ruling in the case of NUFC v HMRC [2023].

The decision, no doubt celebrated by their local rivals at the Stadium of Light, was handed down by Lord Justice Singh and Mr Justice Garnham on 29 November. It seems to have settled a long-standing debate, surrounding the retention and use of materials seized during criminal investigations by HM Revenue & Customs (HMRC).

Fruit of the (Operation) Loom

The case stemmed results from an investigation named “Operation Loom.” This was an operation undertaken by HMRC, probing alleged VAT refund inflation and tax evasion concerning payments routed through football agents by Newcastle United Football Company (NUFC).

This recent decision arrives six years after HMRC successfully defended against NUFC’s Judicial Review challenge to the initial search warrants.

Following the conclusion of the criminal investigation in May 2021, NUFC sought the return and deletion of all documents and copies seized by HMRC under s.17 of the Commissioners of Revenue and Customs Act 1995.

However, HHJ Shetty, ruling in the Crown Court under s.59 of the Criminal Justice and Police Act 2001, refused NUFC’s application but placed restrictions on HMRC’s use of the copies.

Playing in the top division

NUFC subsequently appealed to the Divisional Court, raising questions about the return of seized materials, the use of copies for non-criminal purposes by HMRC, and the imposition of terms and conditions on retention by HMRC under s.17 of the CRCA.

The Divisional Court’s judgment revolved around three pivotal issues:

  1. Returning copies of seized materials
  2. Sharing information within HMRC; and
  3. Imposing terms and conditions on the material

Returning copies of seized materials

The Police and Criminal Evidence Act 1984 (“PACE”) is an Act that governs the major part of police powers of investigation including, arrest, detention, interrogation, entry and search of premises, personal search and the taking of samples

Here, the Court concluded that s.22 of PACE does not mandate the return of copies by the investigator. Requiring such returns would pose practical difficulties, given the similarities between retained copies and the investigator’s work product.

The Court referenced various legal precedents, emphasising property rights and distinguishing between privacy and confidentiality matters.

Sharing information within HMRC

Section 17 of the Commissioners for Revenue & Customs Act (“CRCA”) provides information about sharing information within HMRC.

The judgment affirmed that s.17(1) of CRCA permits HMRC to share information obtained during a criminal investigation for civil tax collection purposes even after the investigation concludes.

This includes retaining copies for utilising the information contained within them.

Section 22 of the same Act (which limits s17 when it comes to data protection law and other scenarios) was found not to have restricted the use of information.

Imposition of terms and conditions

The Court deemed it improper for HHJ Shetty to impose terms or conditions on HMRC’s exercise of power under s17 of CRCA.

The Crown Court, having rejected NUFC’s application, had no authority to impose conditions post-decision.

HMRC’s argument against conditions impeding statutory rights was upheld.

Conclusion

This ruling is seminal in that it clarifies the distinction between seized property and the information contained within it, shedding light on the interplay between s22 of PACE and s17 of CRCA.

The Court’s judgment offers clarity around HMRC’s rights regarding seized materials and provides useful guidance for future cases.

So, another 3-0 drubbing for NUFC.

If you have any queries about this article on NUFC v HMRC, or tax matters in general, please get in touch.