UT/2023/000126 - [2025] UKUT 00145 (TCC)

The Appellants submit that to the extent the FTT Decision reflects a finding that the Appellants derived income from criminal activities then that was a finding the FTT was not entitled to make. The FTT failed to take into account relevant evidence and took into account irrelevant considerations.

The second sentence of FTT [111] in particular is relied on, where the FTT said:

“Even if this was not case, we agree with Ms Black that, given that both Mr Butt and Mrs Begum clearly has access to funds and a lifestyle that exceeded their declared income for which there is no other justifiable or credible explanation, there was a loss of tax for each of the years assessed.”

The first point to make is that the FTT did not in fact make any finding that the Appellants derived income or gains from criminal activity. In line with our reasoning on Grounds 1 and 2 above it did not need to. That is a straightforward and complete answer to Ground 3 as put in the notice of appeal. It is also an answer to various points advanced in written submissions and orally that a finding that either of the Appellants was carrying on a trade of money laundering was irrational on the basis of the evidence before the FTT. The NCA did not need to prove such a trade in order to make out its prima facie case on loss of tax for the purpose of the s36 burden.

The Appellants also mounted challenges to the FTT’s conclusion that there was a prima facie loss of tax in relation to which no credible explanation was given, and to the adequacy of the FTT’s reasoning. For the reasons set out below neither challenge is made out.

Finding of no credible explanation

As to the finding by the FTT that there was no credible explanation for the Appellants’ expenditure, we consider that this was an inference the FTT was plainly entitled to draw from the primary facts. The primary facts concerning bank deposits, personal holiday and property expenditure and loans are not subject to the challenge. The FTT recorded the Appellants’ explanations and rejected those explanations. In summary, it considered there was a lack of corroborative documentary evidence for the explanations. It cannot be said that it was irrational for the FTT to take that view in the light of its assessment as to the reliability of evidence given by the Appellants. Whilst the Appellants placed reliance on the evidence of Mr Davidson, the FTT’s evaluation was that his evidence was of little assistance. In essence, the information he worked off was what Mr Butt and Mrs Begum had told him. He did not question the reliability of that information or seek underlying documentation to establish its accuracy.

The Appellants say that the Edwards v Bairstow error was particularly striking in the case of Mrs Begum because there was no evidence that she carried on any trade or was employed, and she relied financially on Mr Butt. We do not agree. As Ms Black pointed out, the FTT did not make any finding that all of Mrs Begum’s funds came from Mr Butt. In those circumstances it remained open to the FTT to find that she had undeclared income in relation to which there was no credible explanation.

Adequacy of reasoning

The Appellants say that there is no reasoning in the FTT Decision to support its finding that Mr Butt’s explanation of the source of funds was not credible or that Mrs Butt was carrying on any trade. The key principles relevant to assessing the adequacy of reasoning were not in dispute and were recently described by the Court of Appeal in Rahman v Munim [2024] EWCA Civ 123 at [21]. The extent to which reasons are required to meet the test of adequacy will depend on the subject matter. The judge should “identify and record those matters which were critical to [the judge’s] decision”. Fairness requires that the judge should also "deal with apparently compelling evidence, where it exists, which is contrary to the conclusion which [the judge] proposes to reach and explain why [the judge] does not accept it".

Given the concession made by the Appellants in relation to loss of tax, it is understandable that the FTT chose to deal with the loss of tax issue relatively briefly at [111]. In any event, it would be wrong to restrict the scope of the FTT’s reasoning to the second sentence of [111]. That sentence clearly links to unaccounted for personal expenditure identified in the assessments and the FTT’s discussion on the issue of quantum at [130] to [145]. The FTT had recorded at [4] the Appellants’ case that the income was predominantly from Mr Butt’s fashion business and a grocery business but the FTT rejected the Appellant’s evidence. It went through each of the years of assessment recording the Appellants’ contentions, for example that he was not resident (which it rejected at [103] to [105]), that he did not incur the entirety of the purchase price for a property at Dunstable Road and that the conversion costs estimated by Mr Diedrick were excessive. The FTT stated at [132] that these were mere assertions not corroborated by documentary evidence. The FTT also addressed Mr Butt’s arguments in relation to personal and holiday expenditure and that the cost of renovations assumed by the NCA were excessive. The FTT found at [134] that those arguments were not supported by evidence. The FTT explained why it did not accept that it was the proceeds of sale of a Dutch property which funded a loan because that would be inconsistent with evidence that the Appellants did not keep sums of cash at home (see [136]). The FTT agreed with the NCA that the assessments were fair and concluded at [145] that the Appellants had not produced sufficient evidence to reduce or set aside the assessments.

The Appellants also argued before us that the FTT’s finding that there was no credible explanation for the source of the funds was inconsistent with the FTT’s earlier findings regarding Mr Butt’s fashion and grocery businesses. There was no such inconsistency. The FTT addressed why it did not consider such explanations credible: there was a lack of documentary evidence and the Appellants’ oral evidence was unreliable or did not assist.

We are satisfied that the FTT identified and recorded those matters which were critical to its decision as to why it did not accept the Appellants’ explanations as credible. Its reasoning when looked at in the context of the wider decision was clearly adequate.

In conclusion, Ground 3 does not identify any error of law on the part of the FTT.