A person who cheats the Revenue obtains a pecuniary advantage as a result of criminal conduct within the meaning of section 340(6) of POCA.

Despite Court of Appeal in R v. Gabriel (Note) [2007] 1 WLR 2272, the proceeds of tax evasion can be criminal property for the purposes of the money laundering provisions:

R v. K (I) [2007] 1 WLR 2262 (see more below).

In K (I) the prosecution case was that, over a period of 4 years, MR had systematically cheated the revenue of income tax and VAT by under-declaring the takings of his business and transferring the undeclared amount to a money services business for transmission to Pakistan.

Held: a person who cheats the revenue obtains a pecuniary advantage as a result of criminal conduct within the meaning of section 340 (6)  POCA.

However, the dicta and reasoning in this case should be looked at closely where such cases arise.

R v K (I) [2007] 2 Cr App R 10,

Was it open to the jury to find that the £200,000 was “criminal property”?

MR was taken to have obtained a sum equal to the value of the amount of which the Revenue was cheated: section 340(6) and that sum is a benefit by reason of section 340(5).

The question is whether the undeclared takings

• “constitutes a person’s benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly)” [section 340(3)(a)]

To take a simplified paradigm case:

1. let us suppose that over a 2 year period D fraudulently under-declares the takings of his business by £250,000 per annum with the result that he deprives the Revenue of £100,000 in income tax and £25,000 in VAT in each of the 2 years.

2. In each year, D has obtained a pecuniary advantage of £125,000 as a result of his cheating the Revenue.

3. That is a “benefit” within the meaning of section 340)(3)(a) of POCA.

4. The undeclared takings of £500,000 “represent” that benefit “in part” within the meaning of section 340(3)(a) in the sense that the undeclared takings of £500,000 should have borne tax and a sum representing or equivalent to part of that figure should have been paid in tax.

In the judgment:

• a person who cheats the Revenue obtains a pecuniary advantage as a result of criminal conduct within the meaning of section 340(6) of POCA.

R v K (I) [2007] 2 Cr App R 10, see in particular paras 20-21. http://bit.ly/1UdgbHU

R v William and oths [2013] EWCA Crim 1262. [transcript]. http://bit.ly/1U3WpPH

1. The CACD has held that with regards to the definition of “criminal property” (s.327, POCA) for the purposes of the money laundering provisions (Part 7 of the Act), the reference to ‘in whole or in part’ is important “because it shows that the whole property is treated as criminal property, even where only part of it represents benefit from criminal conduct.” [25].
2. Further, s.340(6) is also important in the context of this case because it means that someone who cheats the Revenue by failing to pay the tax he or she should pay, has obtained a pecuniary advantage and therefore is taken to have obtained a benefit within the meaning of sub-section (3) which is equal to the pecuniary advantage.
3. The Court held that the value of that benefit is the amount of the tax unpaid. In cases where the turnover is falsely represented, the benefit is the tax due on the undeclared turnover.
4. However, the “criminal property” (as defined by s. 340) is the entirety of the undeclared turnover and not merely the tax due because the benefit is represented in part by that sum. [27] The Court said that its analysis is, in its view, supported by the judgment of Dyson LJ as he was, in R v K(I) [2007] EWCA Crim 491; [2007] 2 Cr App R 10.
5. COMMENT: time will tell if the first proposition (i.e. concerning the words ‘in whole or in part’) endures.