Sir Richard Scott undertook an inquiry following the collapse, in 1992, of the trial of a UK company known as Matrix Churchill for the alleged supply of prohibited weapons components to Iraq. In the course of his studies Sir Richard identified an instance where a visit to a company by HM Customs and Excise (HMCE), ostensibly for a VAT audit, had been used to see if the company was involved in the supply of components for weapons. Sir Richard thought this covert action amounted to unlawful trespassing, as the primary concern of the visit was a non-VAT matter, and recommended against its use. HMCE accepted the recommendation and reported this to Parliament on 25 June 1996. This voluntary forbearance is known as the “Scott undertaking” and it has been the HMCE, now HM Revenue and Customs (HMRC), policy position ever since.
The Scott undertaking, restricting certain covert activity by HMCE and now HMRC criminal investigators, was made at a time when there was no human rights compliant legislation allowing covert entry on to property. This changed with the enactment of the Police Act 1997.
The Police Act 1997 regulatory regime now in place provides a legal framework for the type of covert activity identified by Sir Richard. The process is sufficiently robust to ensure that such covert investigation activity is only used in the most serious cases when the tests of necessity and proportionality are met. The action is authorised by a designated authorising officer and the activity then approved by the Office of Surveillance Commissioners.
As a result, the undertaking given by HMCE following the Scott report has been overtaken by the Police Act 1997 and the Regulation of Investigatory Powers Act 2000. But because HMRC continues to observe the Scott undertaking, legitimate investigation activity is not being used.
In September 2009 this issue was raised with the inspectors of the Office of Surveillance Commissioners during their annual inspection of HMRC. The chief surveillance commissioner, Sir Christopher Rose, subsequently considered the issue and concluded that HMRC’s adherence to the Scott undertaking served no useful purpose and was likely to inhibit otherwise proper, human rights compliant, investigative processes. Sir Christopher wrote to the director of criminal investigation on 6 January 2010 setting out this position and expressing his support for steps to release HMRC from its undertaking to adhere to the Scott recommendation.
HMRC will be released from the Scott undertaking from the date of this statement.