Tax fraudster fails in appeal against proceeds of crime confiscation order 

Joanne Mooney devised a scheme whereby she acted on behalf of others to secure tax rebates totalling £50,981, for which she received a 30% commission of £15,294.

She claimed that her “benefit” from the criminal conduct was the lower figure, but by a majority of two-to-one, appeal judges in the High Court of Justiciary rejected her appeal.

‘Fraudulent scheme’

The Lord Justice Clerk, Lady Dorrian, sitting with Lord Glennie and Lord Turnbull, heard that the appellant pled guilty to a charge of formulating a fraudulent scheme whereby HMRC were induced to pay claimants a total of £50,981 not due to them; and whereby an attempt was made to induce payment of a further sum of £35,968. 

Of the £50,981 the appellant, who was claiming to provide a legitimate service of completing tax returns, received £15,294.

The sheriff imposed a sentence which included a compensation order to HMRC in the sum of £15,000. 

In terms of section 92 of the Proceeds of Crime Act 2002, the sheriff also made a confiscation order, in which the accused’s benefit from the criminal conduct was identified as £50,981 with a recoverable amount of £1 and an order for payment of that nominal sum.

Section 143(4) of the 2002 Act provides that a person “benefits” from conduct if they “obtain property as a result or connected with the conduct”.

‘Sheriff erred’

On behalf of the appellant it was argued that the sheriff “erred” in determining the appellant’s benefit from her criminal conduct in the larger sum of £50,981 rather than £15,294. 

It was submitted that what is critical is the “benefit obtained” by the individual offender rather than the measure of loss to the dupe. 

The appellant required to have “received the benefit” and been able to exercise “control” over its disposition - the focus was on a “power of disposition and control”. 

In the present case the appellant did not have that power; the submitting to HMRC of the details of bank accounts to which the rebates should be paid did not constitute “direction” in the sense required. 

Following R v May 2008 UKHL 28, the UK Supreme Court in R v Waya [2012] UKSC 51 emphasised that the issue was whether the benefit had ever been obtained by the offender, as opposed to whether he had retained it. 

The sheriff sought to distinguish the situation from that in Waya on the basis that it was a case in which there had been no actual ”loss” to any identified party, but the measure was the benefit to the offender, not the loss to others. 

It was argued that the benefit to an individual accused must be a benefit which that accused has “enjoyed”.

‘Control’

On behalf of the Crown, it was submitted that contrary to the argument made by the appellant, the courts had found that “property does not need to pass through the hands” of an individual for it to be obtained by them - the accused only had to have control over the disposition of that property. 

In the present case, it was clear that the appellant had this control over the disposition of the property. 

She was the individual that completed, registered and submitted the fraudulent tax-returns and was aware that by doing so, she was representing a tax overpayment to HMRC who would subsequently repay each individual concerned. 

“But for” her conduct, there would have been no repayment; and in creating the self-assessment returns she had control over the bank account details input, on each form, thus controlling the flow of the money from HMRC. 

If she had provided her own bank account details in the self-assessment return, and thus received the rebate and paid this out to each individual after deduction of her fee, there would have been no argument other than she had “obtained” the full amount. 

‘Benefit obtained from criminal conduct’

Refusing the appeal, the Lord Justice Clerk and Lord Turnbull ruled that the sheriff was entitled to reach the conclusion she did.

In a written opinion, Lady Dorrian said: “As Lord Turnbull has noted, benefit is linked with ‘obtaining’, not ‘receiving’. The former covers both securing and procuring, and to hold the appellant as having obtained the funds in question in the present case does not in my view offend against the normal meaning of the word. 

“It is not a question of profit which must be addressed: the sums paid over to the third parties were a necessary part of the appellant’s scheme; they may essentially be viewed as equivalent to the expenditure of committing the fraud, which in other cases has clearly been viewed as part of the total ‘obtained’ by the fraudster. 

“That the appellant’s scheme was designed so that these payments were made directly by the dupe rather than processed through her own accounts does not in my view deprive her of the requisite degree of control which enables one to say that she has ‘obtained’ the total proceeds.”

The judges noted that the overall aim of the statute is “to recover assets acquired through criminal activity” and that previous criticism of the drafting of the legislation could be explained in part by the “real difficulties inherent” in the process of recovering proceeds of crime.

She added: “That proceeds of criminal activity could be excluded from the operation of the section merely because the scheme devised and operated by the appellant functioned in such a way that payment of sums necessarily fraudulently obtained to secure the running of the scheme were made directly by the dupe rather than channelled through the medium of the appellant would simply be to enhance and encourage those difficulties. 

“As with any interpretation allowing an offender to set off the cost of his criminal activity, it would lay the process of confiscation wide open to simple avoidance.”

Dissenting, Lord Glennie said the word “obtain” should be given its “normal meaning”.

He explained: “A person ‘obtains’ property in the sense in which that term is used in this part of the Act when he received it, either alone of jointly or through another, in such a way as to assume over it a power of disposition or control. That is the natural meaning of the word. That is the meaning which should be applied in a case such as the present.

“Giving the word its broad, normal meaning, I can see no possible basis upon which it can be said that the appellant ‘obtained’ from her criminal conduct more than the £15,294.30 paid to her as commission by the individuals for whom she had dishonestly secured tax rebates from HMRC. Indeed I cannot conceive of any legitimate construction of the word which would enable me to say that the accused in this case had ‘obtained’ more than that sum.”