Case Preview: R v Harvey
09 Thursday Jul 2015
On 24th March 2015, the Supreme Court heard the appeal of Mr. Jack Harvey in which it was submitted that VAT, either paid or accounted for to HMRC, should be discounted when calculating the benefit figure under the Proceeds of Crime Act 2002.
The appellant was the owner of a family run business (“JHL”) concerned with plant hire and contracting. The company had built up a large stock of plant and machinery which it hired out, either separately or together with drivers to operate the machinery. It also undertook contracting work using its own plant and drivers.
JHL frequently purchased and sold plant, much of which was stolen and this was known to the Appellant. The Appellant also set fire to several items of plant belonging to rival contractors.
The Appellant was prosecuted and convicted of offences of arson and handling stolen goods. After trial the CPS asked Truro Crown Court to proceed under s6 POCA thus setting in motion confiscation proceedings.
HHJ Elwen at Truro Crown Court heard the confiscation proceedings in March 2012. The Crown’s Statement of Information asserted that the Appellant had a criminal lifestyle, that all assets of JHL should be treated as the Appellant’s property and that for the purposes of POCA, the following comprised the Appellant’s benefit:
- All stolen items of plant
- All monies received and banked by JHL in the preceding six years of the relevant day of in 2003.
Judge Elwen assessed that the benefit to the Appellant as £314, 700, representing the value of the stolen items of plant, and £1,960,754.40, as the proportion of receipts derived from the stolen plant. A Confiscation Order was made for the sum of the total amount of £2,275,454.40.
The Court of Appeal
The Appellant appealed to the Court of Appeal against the Confiscation Order which inter alia included the submission that the Judge had erred in failing to deduct from the turnover figure the amount of VAT received by the Appellant from customers before proceeding to assess how much of the turnover was attributable to the Appellant’s general criminal conduct.
The Court of Appeal noted that the law in relation to confiscation has undergone a seismic shift following the Supreme Court’s decision in R v Waya  UKSC 51 and it took the opportunity to review the pre – Waya authorities to determine the extent to which they remain good law.
In R v Del Basso and Goodwin  EWCA Crim 1119, payment of VAT and other expenses were held irrelevant for the purposes of assessment of benefit. Leveson LJ emphasised that the focus should be on the property coming to offenders, not what happened to it subsequently.
In Waya, the majority of the nine-judge court agreed with the principle in Del Basso and affirmed that there could not be an accounting exercise whereby the defendant offsets the costs of committing the crime. The focus of POCA was upon the defendant’s obtained proceeds of crime, whether retained or not. It was accepted that confiscation may have the effect of removing from the defendant more than his net proceeds of crime but this was consistent with the legislative objective and a proportionate means of achieving the objective.
The Court of Appeal concluded that there was nothing in Waya which called into question the manner in which the Court of Appeal dealt with VAT in Del Basso.
In the present case, the Appellant’s first submission was that three quarters of the £843,827 of VAT collected was accounted for and expended upon the purchase of goods and services and therefore Appellant should be given credit for the VAT element of these purchases. Applying the principles of Del Basso and Waya, the Court concluded that it would be wrong in principle and repugnant to carry out an accounting exercise in respect of those monies. The Appellant had used the proceeds of criminal conduct to purchase goods and services and it was wrong in principle for the Appellant to be given credit in respect of the VAT element of those purchases. In the alternative, it was submitted on behalf of the Appellant that of the VAT collected by JHL, £200,745 had been paid over to HM Revenue and Customs. This was also rejected for the same reasons.
Appeal to the Supreme Court
Lord Neuberger, Lord Mance, Lord Reed, Lord Hughes and Lord Toulson heard Mr Harvey’s appeal to the Supreme Court. The decision of the Supreme Court will determine the issue of whether VAT either paid or accounted for to HM Revenue and Customs should be excluded when calculating the benefit figure to be confiscated pursuant to the Proceeds of Crime Act 2002.