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

The Appellants appealed the assessments and the penalty assessments to the FTT. In a hearing lasting six days, the FTT, as well as receiving a large documents bundle, heard oral evidence from the Appellants. The FTT did not find Mr Butt to be a “particularly helpful or reliable witness” explaining that his evidence was “at best, somewhat vague” ([8]). As for Mrs Begum the FTT said it was “unable to derive much assistance from her evidence which was limited in nature” ([11]). The FTT also heard evidence from Raymond Davidson, who had been instructed by the Appellants as an expert witness to analyse their available bank statements with a view to establishing that the monies put through their bank and accumulated were not the result of illegal activity. Again the FTT found it was “unable to derive much, if any assistance” from this evidence finding it to be “of limited value only”. The FTT noted the reports Mr Davidson produced had not questioned or sought further underlying documents to support the accuracy of figures that had been provided by Mr Butt, Mrs Begum and their solicitors ([12] to [17]). On behalf of the NCA, the FTT heard evidence from Kevin Diedrick, the NCA officer who issued the s317 notices, assessments and penalties. It found him to be “a very credible and straightforward witness” ([18]).

The FTT recorded various findings of fact including that in the years before 1998-1999 Mr Butt had said he was based in the Netherlands and had operated a string of “reasonably profitable” fashion businesses in Amsterdam ([21]). From 1980 he had established a grocery business in Amsterdam. The FTT detailed various property transactions in Luton, the Netherlands, and London, an extension to the family home, various loans and transfers made, rental income (some of which Mr Butt had declared) in relation to the various properties held, and purchase costs incurred on Mr Butt’s car ([20] – [43]).

The FTT dealt with the history of the tax investigation, quoting at length sections from the year by year explanation in the “view of the matter” letters as to the basis on which the assessments had been made. These explanations identified the declared income and then described the sums required to fund known expenditure and unexplained deposits into bank accounts. Similar letters were served on Mrs Begum except that in her case she had not declared any income for tax purposes. The justification in her letters was similarly analysed year by year and by reference to rental income and unaccounted for expenditure on holidays and council tax payments. The FTT also detailed the course of the criminal investigation into the OCG and family members including Mr Butt ([44] –[74]).

The FTT identified various issues for determination at [75] as follows:

“(1)

whether the qualifying condition for the Section 317 Notices was met;

(2)

whether Mr Butt was resident in the UK for tax purposes during 1996-97 and 1997-98;

(3)

the validity of the ‘discovery’ assessments;

(4)

whether the assessments were made in time;

(5)

quantum of the assessments; and

(6)

Penalties”

The FTT found that the qualifying condition for the NCA’s s317 notices was met ([77] to [102]). As set out by the FTT (at [83]) this entailed the NCA establishing that Mr Diedrick had “an objectively reasonable suspicion that there was criminal conduct and that Mr Butt and/or Mrs Begum received some income, in the years for which they were assessed, either directly or indirectly as a result of that criminal conduct.” The FTT had earlier noted that the threshold in s317(1)(a) POCA of “reasonable grounds to suspect” was low, that it was not necessary to have evidence amounting to a prima facie case in order to have a reasonable suspicion and that hearsay evidence might be sufficient. It concluded (at [88]) that “Mr Diedrick’s belief that some income of Mr Butt and Mrs Begum (whose evidence was that she had relied on her husband for financial support) had been derived from criminal conduct was reasonable”. The FTT reached that conclusion “having regard to the whole surrounding circumstances, particularly the close family relationships that existed between Mr Butt, Mrs Begum and their adult children who lived with their parents and contributed towards the household bills and purchase of assets…”. The FTT also concluded (at [100]) that the basis of the assessments, as set out in the “view of the matter” letters was sufficient for Mr Diedrick to have had reasonable grounds to suspect that taxable income and/or chargeable gains accrued to Mr Butt and Mrs Begum in the years for which they were assessed.

The FTT dealt under the heading “source issue” at [89] – [100] with a submission on behalf of the Appellants that it was clear from the assessments that the income being charged to tax was from a trade which had been identified by Mr Diedrick as the trade of money laundering and that any suspicion the income had been obtained from money laundering was unreasonable. At [92], the FTT rejected the submission that Mr Diedrick had made the assessments on the basis of a trade of money laundering. At [100], the FTT also rejected a submission that it was necessary for the NCA to establish that any of the income assessed arose from criminal conduct.

As regards whether the discovery assessments were valid and in particular whether the NCA had shown that it had discovered a loss of tax for the purposes of s29 TMA, the FTT noted at [110]:

“110.

At paragraph 108 of his skeleton argument and again in his oral submissions Mr Blades confirmed that it was accepted that if the s317 POCA qualifying condition was satisfied i.e. the NCA had reasonable grounds for suspecting that chargeable income/gains arose to Mr Butt and Mrs Begum as a result of criminal conduct, it was not disputed that the NCA had discovered a loss of tax.”

In the next paragraph, which the Appellants’ grounds highlight as showing significant errors of law, the FTT continued:

“111.

Given our conclusion that the s 317 POCA condition has been satisfied it is not necessary to consider whether the NCA discovered a loss of tax, it has been accepted it has. Even if this was not the 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 FTT concluded at [112] that subject to any time limit issues, the assessments were therefore valid. It also concluded at [116] and [117] that Mr Butt had deliberately not declared all his income in his tax returns so that the condition in s29(4) TMA was satisfied. In any event, the condition in s29(5) was also satisfied.

The FTT then considered whether the assessments had been made in time ([119] to [129]). The assessments on both Appellants for 2011-12 and on Mr Butt for 2012-13 fell within the standard four-year time limit under s34 TMA. The FTT found that the assessments for 1996-7 to 2010-11 in respect of Mr Butt were also in time by reference to the extended time limit in s36 TMA given its finding that Mr Butt had deliberately omitted to include income in his tax returns. Similarly, in relation to Mrs Begum, the FTT found that the assessments on her for 1998-1999 to 2010-11 were on the basis that she had deliberately failed to notify taxable income.

The FTT considered and rejected (at [130] to [144]) the Appellants’ various points on the quantum of the assessments concluding at [145] that as the Appellants had not produced sufficient evidence to reduce or set aside the assessments they stood good. The FTT also upheld the penalties that had been imposed on both Appellants.