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Search warrants in respect of football club tax 'dawn raids' upheld by Court


Search warrants granted to the UK's HM Revenue & Customs (HMRC) to search premises connected with Newcastle United Football club and seize documents in connection with possible tax fraud were valid, the High Court has ruled.

The warrants authorised raids of premises connected with the club and the home address of the managing director which took place in April 2017. HMRC applied for the warrants in connection with its investigation of suspected evasion of VAT, income tax and national insurance contributions (NICs) by the football club in relation to payments made to and via football agents.

As HMRC search warrants are approved by a circuit judge at a hearing where the taxpayer is not present, the football club could only challenge the warrants by way of judicial review once the documents had already been seized. After the raids, the football club obtained an order for interim relief, which prevented HMRC from examining the documents it had seized until the matter had been considered by the courts.

In its application for judicial review the club argued that the search warrants were invalid because they were excessively wide and there were no reasonable grounds to believe the club was involved in fraud. It also challenged the procedural aspects of the hearing at which a circuit judge granted the warrants, arguing that the fact that the judge had been given insufficient time to read the papers and that he had failed to give reasons for his decision invalidated the warrants.

In their decision, Lord Justice Beatson and Mrs Justice Whipple dismissed the football club's challenges to the warrants.

"There were some errors in the information provided by HMRC in the application, but for the reasons we have given none of those errors was material," they said in their decision. "It follows that in our judgment, the case advanced in the application was materially correct on its facts."

"Further, we are satisfied that the evidence and the facts disclosed by that evidence provided reasonable grounds for the belief that [the football club] was engaged in criminality. …. It is self-evident that 'reasonable grounds' for belief are just that. They do not mean that any criminal offence has in fact been committed. There may, at the end of the investigation, turn out to be innocent explanations for what happened," they said.

Jason Collins, a tax crime expert at Pinsent Masons, the law firm behind Out-Law.com, said: "This case shows that the bar for an investigator to obtain a warrant is set relatively low, so there has to be a very clear defect for the warrant to be overturned."   

"It also shows that those under criminal investigation need to pick their battles wisely.  Having failed to overturn the warrant, the club has been left with the High Court publicly affirming that HMRC has reasonable grounds for believing the club has been engaging in criminality – which can conjure up negative newspaper headlines, even if the Court has said that this is not a statement of guilt," he said.

The High Court judges also said that the circuit judge's failure to give reasons for granting the warrants did not amount to a procedural defect invalidating the warrants as the reasons for the issue of the warrants were apparent from the application, read with the transcript of the hearing. The judges said it was clear from the transcript that the circuit judge had questioned the HMRC representative about those aspects of the application about which he was unsure, and concluded on the basis of the information provided that he would issue the warrants. 

The High Court said that the circuit judge's failure to given reasons was "unfortunate" and suggested that the Criminal Procedure Rules Committee should consider whether circuit judges should be directed by appropriate words on the standard form used for search warrant applications to give succinct reasons when issuing or refusing to issue a warrant.

Although HMRC had only allowed the judge 60 minutes reading time for a complex application, which the judge pointed out was "optimistic", the High Court said that this was not indicative of a failure by the judge to scrutinise the application sufficiently because the judge had stated twice that despite the inadequate time estimate he had read the application. 

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