Wider use of materials seized for a criminal investigation

The High Court has held that HMRC were not prevented from using information and copies of documents obtained during a criminal investigation in later civil proceedings: Newcastle FC v HMRC [2023] EWHC 3021. The Court rejected arguments that HMRC were obliged to return any copies of documents that they had made and/or that they were not entitled to subsequently share those copies with the civil arm of HMRC.

Background

Newcastle FC were subject to HMRC criminal investigation in 2017, during which the Crown Court granted warrants authorising HMRC officers to enter and search the premises under powers in the Police and Criminal Evidence Act 1984 (PACE). A large amount of material was seized. The investigations subsequently led to HMRC making assessments in respect of VAT and claims in respect of unpaid NICs. However, HMRC did later confirm that the criminal investigation was closed, although that investigation still indicated “tax non-compliance of a serious nature”. Accordingly, HMRC confirmed that “the matter will now be referred to colleagues elsewhere within the Fraud Investigation Service”.

To assist in the civil investigation, HMRC confirmed that they would return all hard copy material seized, but would retain digital copies of material that is “thought potentially relevant to any tax irregularity and therefore the civil assessment and collection of tax” and share it with colleagues responsible for any civil investigation pursuant to section 17 of the Commissioners for Revenue and Customs Act 2005 (CRCA). This provides that “Information acquired by the Revenue and Customs in connection with a function may be used by them in connection with any other function”.

Decision of the High Court

The High Court has rejected Newcastle’s application in this case.

Firstly, the Court noted that section 22 of PACE does not, on its correct interpretation, require the return or permanent deletion by HMRC of copies and images of documents once a criminal investigation has concluded. On its true interpretation, section 22 is concerned with the seized originals and not with copies or images. Section 22 is concerned to ensure that there is no greater interference with property rights than is necessary to achieve the purposes of criminal investigation. It does not address other interests which may be protected by the law, for example the confidentiality or privacy interests in the content of the information which is contained in documents. Those interests are protected by other rules of law.

In any event, the Court noted that section 22 allows seized material to “be retained so long as is necessary in all the circumstances”. Even if section 22 did apply, the words “so long as is necessary in all the circumstances” included the case where HMRC seek to retain the copies and images for public (but non-criminal investigation) purposes. These include the public purpose of the collection of taxes.

The Court also held that the terms of section 17(1) of the CRCA permit HMRC to share information which they have obtained for the purpose of a criminal investigation with others within HMRC for their (civil) tax collection purposes even after the criminal investigation has been concluded. Both are “functions” of HMRC. The language of section 17(1) is about “use” of “information” and not about the retention of the underlying documents. Section 22(1) of PACE is concerned with the original documents, and so does not restrict or prohibit the use of the information such as to fall within section 22(2).

Accordingly, even if a power to retain documents under section 22 of PACE lapses with the conclusion of a criminal investigation, section 22 is not a provision that restricts or prohibits the use of information in such documents within the purposes of section 17 of the CRCA.

Ultimately, the Court held that section 17(1) of the CRCA does permit HMRC to share information which has been obtained for one of its purposes for another of its purposes and the provisions in PACE do not restrict this ability. This does not, however, mean that section 17 confers an unfettered discretion. It is governed by the normal principles of public law, including judicial review and HMRC’s duties under the law of confidentiality.

Comment

The decision confirms HMRC’s right to retain digital copies of relevant information seized during a criminal investigation of a taxpayer and then, where necessary, use that information during subsequent civil proceedings. Newcastle had accepted that HMRC were entitled to retain their work product and derivative material from the seized documents. However, as the Court pointed out, if that work had quoted in large part or perhaps even completely the information which was contained in the copy which HMRC had obtained, it is difficult to see what practical distinction there would be between retention of the copy and retention of the work product.