Raids face legal challenge

11 June, 2010

HM Revenue & Customs may be infringing the European Convention on Human Rights when impounding stock suspected of being at the centre of duty fraud.

The claim has been made by a lawyer specialising in cases involving HMRC and representing a company which has had stock seized for six weeks pending an investigation.

Peter Hastings, a partner with Norwich-based Rogers & Norton, said detention of stock for that length of time could contravene human rights legislation.

“Even if there were grounds to detain, the decision to seize or return stock really must be made within four weeks, not just as a matter of law but for the sake of legitimate businesses, the economy and jobs,” said Hastings.

He said he sympathised with widely held drinks industry concerns about the level of duty fraud involving illegitimate traders, but insisted innocent companies and their employees were suffering under the weight of HMRC investigations.

Hastings said he had recently represented large and small legitimate wholesalers whose businesses had been put in jeopardy by such tactics.

“There has to be a crackdown on rogue traders but the problem is in getting the right balance,” he added.

Hastings is considering mounting a legal challenge to what he says appears to be HMRC’s power and ability to detain goods and stock without reasonable grounds for doing so, or without suspicion over the legality of whether duty has been paid.

“I recently advised a business whose entire stock, valued in excess of £1 million, had been detained while HMRC investigated its duty status. This detention put the business and its employees’ jobs at risk. The stock was eventually released. I’m now acting for another business whose entire stock has been detained, again pending an investigation. There are no apparent reasons for believing duty has not been paid.

“HMRC is investigating the ‘chain’ and, six weeks after the detention, no progress appears to have been made. My client has had to make redundancies even though there is no suggestion or evidence that it has acted unlawfully in any way.”?However, James Bielby, the Federation of Wholesale Distributors’ chief executive, said none of his members had complained about unfair treatment from HMRC.

“When HMRC goes to a cash and carry it suspects is acting fraudulently, it says the company has 10 days to prove its duty is paid,” he said. “After that the goods are seized and are lost forever unless it goes to tribunal. There’s probably a bit of collateral damage in terms of people being raided who haven’t done anything wrong, but it shows HMRC are doing a lot of raids if it’s encouraging law firms to come sniffing around.”

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