CUSTOMS and EXCISE  Something to declare  21/03/2004



Nelson Says: "Bankruptcy can be a violation of Article 8"

The telephone call that turned Jack and Ann Baars's life upside down came at 2am as they slept soundly at their 650,000 holiday home in Delray Beach, Florida.

The keyholder to their modern five-bedroom house in Harrow Weald, Middlesex - where it was 7am - had called them with the news that Customs officials were raiding their home. "I was in a state of shock," said Mr Baars. "Yet I told our friend, 'Let them search the house. I have nothing to hide.' "

Until August 14, 2002, Mr and Mrs Baars, who have been together for 20 years and married for the past 12, had never had a brush with authority more serious than a parking ticket. Mr Baars, now 64, a self-made businessman who has been in the food and drinks' business since leaving school at 16, and his wife, 57, were financially secure with no mortgage on either their Florida home or their 650,000 British home. Their one concern was when they should retire and how to divide their lives on either side of the Atlantic.

Now, towards the end of a month-long holiday, Mr Baars found himself groggily answering questions from a Customs official. According to Mr Baars, the officer said: "We are serving an assessment on you for non-payment of excise duty and Vat totalling 1.6 million. Do you have the money to pay it?"
An astonished Mr Baars replied: "No. It would bankrupt me." According to Mr Baars, the official asked when the couple were returning home. When Mr Baars gave him the date, the official replied that they ought to arrest them at Heathrow but would spare them the embarrassment if they agreed to attend a police station at an arranged date.

When the Baarses returned, alarmingly, they found themselves being "fast-tracked" towards bankruptcy. "While we were on the plane flying home, Customs arranged a court hearing bringing administrators in to run our company. They knew we could not be there to defend ourselves," said Mr Baars.

Customs was exercising its power to take action, including a prosecution for fraud, or civil action, including bankruptcy proceedings, against those it suspects of acting illegally or improperly.

The Baarses believe that, after a series of embarrassing, collapsed criminal court cases, Customs has embarked on a draconian policy in which those suspected of fraud are pursued into rushed, one-sided and secretive insolvency proceedings.

Mr and Mrs Baars discovered that they were being accused of excise and Vat evasion relating to 42 lorryloads of whisky and beer. Mr Baars says he was astonished to be accused of being the "Mr Big" in a scam in which the drinks were allegedly being sold in Britain - without duty being paid - when it was claimed that the goods had been exported to France and Spain.

According to the Baarses, they were then taken to court to be - in addition to their business - put into "voluntary administration". A deputy registrar initially ruled for the couple, but two days later a judge overturned the decision on appeal. In October 2002, their two new BMWs were confiscated and put into storage.

In 2000, after the sale of his family's food and drinks business, Mr Baars had set up a partnership, Jack Baars Wholesale (JBW), with his wife. He ran the wine and spirits wholesalers from a spare bedroom.

Mr and Mrs Baars insist that JBW always acted within the law, using bonded warehouses: government-approved storage areas where goods are kept before duty has been paid. For example, the excise duty on a case of whisky is nearly 66 plus Vat, which is only paid when the alcohol is "withdrawn" from the bond to be sold.

As the pressure grew and the couple were told they faced a bankruptcy hearing, Mrs Baars was close to a nervous breakdown and Mr Baars had a heart attack in December 2002. "I couldn't believe what was happening to us," said Mrs Baars, close to tears. "They just wanted to crush us." The Baarses even told Customs that, if they believed that they were guilty of such excise and Vat evasion, they should be charged with fraud. "I wanted the chance to clear our name in court," said Mr Baars.

Mr and Mrs Baars's grievance comes at the end of a difficult and controversial period in the 350-year history of the tax-collecting authority. In 1992, the Matrix Churchill trial at the Old Bailey vividly displayed the awesome power of Customs. It followed the prosecution of executives of the Midlands-based engineering firm for breaches of regulations on trade with Iraq - despite evidence that the Government knew of the exports. The trial collapsed when the late Alan Clark, then a Tory minister, disclosed such deals had been encouraged.

The organisation was back in the spotlight last Wednesday, when Gordon Brown, the Chancellor, announced in his Budget speech that Customs and Excise will merge with the Inland Revenue. He hopes that the single department will save billions of pounds, as well as enabling businesses to have one point of contact for their taxes.

So where do the Baarses stand? After spending more than 250,000 in legal costs, they have finally been thrown a "lifeline". A High Court judge ruled in January that it was unfair for the couple to be "substantially ruined without them having the opportunity to cross-examine the evidence against them".

Customs has appealed against the decision, but if the Baarses win the appeal their case will be heard by a tribunal and they will have the chance to put their side of events in public.


Customs yesterday refused to comment on the Baarses' case on the grounds that an appeal is pending. A spokesman for the department said: "There is no question of Customs trying to circumvent traders' rights. The insolvency process is overseen by the courts and insolvency proceedings are just one means of Customs securing and safeguarding duties and revenues that are due."


The Baarses insist that they will fight to the end for justice. "We have worked hard for nearly 50 years to enjoy our retirement," said Mrs Baars. "We deserve better than this."


12 January 2004: Customs accused of breaching human rights

26 December 2003: Customs filter out cigarette smugglers as they leave Calais

In the Matter of Jack Baars Wholesale - Court Service

HM Customs and Excise


1 APRIL 2004   Enterprise Act Reforms


On 1 April 2004 the provisions of the Enterprise Act 2002 relating to personal insolvency come into force. The business world is bracing itself for a significant increase in the numbers of people willing to declare themselves bankrupt, particularly in the area of consumer credit, given the possibility of the bankruptcy restrictions lasting for less than a year.


Insolvency Reform under the Enterprise Act (draft legislation)


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