Calculation of Criminal Benefit

I am working on a confiscation case and I dispute with government agancy what constitutes criminal benefit. We are agreed that it is not the net profits  but I contend that it is the turnover from the offences, which is exclusive of VAT whereas the govt agency contends it is the gross turnover inclusive of VAT . Any thoughts?  

GJM

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davidwinch's picture

I believe it is the gross amount inclusive of VAT

davidwinch | | Permalink

I presume that you are working under Part 2 of Proceeds of Crime Act 2002.

The interpretation sections are relevant and in particular section 76 and section 84.

From s76:

(4)  A person benefits from conduct if he obtains property as a result of or in connection with the conduct.

(5)  If a person obtains a pecuniary advantage as a result of or in connection with conduct, he is to be taken to obtain as a result of or in connection with the conduct a sum of money equal to the value of the pecuniary advantage.

(6)  References to property or a pecuniary advantage obtained in connection with conduct include references to property or a pecuniary advantage obtained both in that connection and some other.

(7)  If a person benefits from conduct his benefit is the value of the property obtained.

From s84:

(2)  The following rules apply in relation to property—

     (b)  property is obtained by a person if he obtains an interest in it;

     (h)  references to an interest, in relation to property other than land, include references to a right (including a right to possession).

 

Looking at all of that it seems to me that a trader who is, for example, owed money by a customer "obtains" for this purpose the amount which he is owed.  That, obviously, is an amount inclusive of VAT.

Having said that in my experience the prosecution sometimes fail to realise this and seek the amount of the turnover exclusive of VAT because they look at the turnover figure in the accounts.  It sounds like, in your case, they are looking at amounts banked (which of course is inclusive of VAT).

Not the answer you wanted, sorry!

Are they also seeking the indexation uplift under section 80(2)(a)?

David

P.S. There may be legal issues concerning the 'benefit' obtained by the defendant.  Some older decisions, such as Neuberg, are no longer considered to deal with that issue correctly.  Have a look at the comments in the Court of Appeal in May this year in the case of R v Basso & Another [2010] EWCA Crim 1119.

cymraeg_draig's picture

Bizarre rules

cymraeg_draig | | Permalink

If the trader did not declare the income and pay over the VAT on it then the gross is the benefit obtained.

If, however, he did declare it and pay the VAT over, then by using the gross value the government are effectively being paid the VAT element twice.

Does that mean the government is guilty of money laundering ?

 

Of course it would be rather unusual for someone to declare the proceeds of crime for VAT purposes. Rather depends what offence he is alleged to have committed.

 

 

 

 

davidwinch's picture

Words v meaning

davidwinch | | Permalink

C_D

PoCA 2002 is full of words and phrases being used which are defined to have a meaning quite different from their meaning in everyday English language use.

Most obviously "money laundering" is defined in Part 7 of the Act to mean something which need not involve money and need not involve laundering either.

So it is that "confiscation" in PoCA 2002 is not concerned with confiscating anything (it does however concern ordering the defendant to pay a sum of money to the state) and "benefit" is not about the amount by which a person benefits from his crime.

In that context the fact that the "benefit" is based on VAT inclusive turnover of a criminal activity (rather than the profit derived from it) should not come as a surprise.

In the Basso case to which I referred, the crime was that two gentlemen traded in partnership as a 'park & fly' business offering long stay car parking facilities on land near Stansted airport.  The trade was carried on legally in every respect except one.  VAT was declared and paid, staff wages were subject to PAYE.  But there was no planning permission for that use of that land and ultimately the local authority issued an enforcement notice prohibiting the activity.  The partners carried on trading regardless - even after the issue of the enforcement notice.

The benefit of each partner for confiscation purposes was the partnership turnover inclusive of VAT arising after the issue of the enforcement notice.  (Each partner's benefit was the full turnover because the monies were received on behalf of each of them jointly.)  Mr Basso was fined £3,000 and his partner was fined just £5 for failing to comply with the enforcement notice.  However each of them was held to have obtained a 'benefit' of over £1.8 million for confiscation purposes.

The judge said this:

"I conclude with a final observation about the mentality of the [appellants] and other similar law breakers. I have received the strong impression that neither the [appellants] nor … their accountant appreciated fully the risk that the companies and individuals involved in the park and ride operation faced from confiscation proceedings. They have treated the illegality of the operation as a routine business risk with financial implications in the form of potential fines or, at worst, injunctive proceedings. This may reflect a more general public impression among those confronted by enforcement notices with the decision whether to comply with the law or to flout it. The law, however, is plain. Those who choose to run operations in disregard of planning enforcement requirements are at risk of having the gross receipts of their illegal businesses confiscated. This may greatly exceed their personal profits. In this respect they are in the same position as thieves, fraudsters and drug dealers."

 

David

cymraeg_draig's picture

Spin & Twist

cymraeg_draig | | Permalink

Or, to put it another way, succesive governments (and the civil serpants who actually draft legislation as MPs are generally far too thick) in the time honoured fashion of the civil service, continue to take the worlds richest language and twist it out of all recognition to ensure that the"ordinary man" hasnt a cat in hell's chance of understanding it.  By this means they ensure that "they" (the state) can misrepresent parliament's actual intentions to suit whatever situation they wish to address.  

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