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On appeal from: 2013 EWCA Crim 1104

The Supreme Court, by a majority of 3:2, allowed the appeal concerning whether VAT, paid or accounted for to HMRC, should be discounted when calculating the benefit figure to be confiscated under the Proceeds of Crime Act 2002.

Giving the joint leading judgment, Lord Neuberger and Lord Reed stated that the VAT for which a defendant has accounted to HMRC is in a different category from either income or corporation tax, and from expenses incurred in connection with acquiring money or an asset. They acknowledged that these factors give rise to a powerful argument that when VAT has been accounted for to HMRC, it has not been “obtained” by the defendant. However, they rejected the appellant’s submission that this conclusion follows from the wording of POCA 2002, because of the principle enunciated in R v Waya [2012] UKSC 51 that property obtained as a result of or in connection with crime remains the defendant’s benefit whether or not he retains it.

They clarified that although a provision effecting double recovery of tax is not forbidden by the ECHR, A1P1, it is at risk of being found disproportionate, given that sums payable pursuant to POCA 2002 are intended to be deterrent and not punitive. Waya made clear that where the proceeds of crime are returned to the loser it would be disproportionate under A1P1 to treat such proceeds as the “benefit obtained”. That situation is similar to the collection of VAT, and the policy underlying the principle is in part that a defendant who makes good a liability to pay or restore should not be worse off than one who does not.

For judgment, please download: [2015] UKSC 73
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watching the hearing please visit: Supreme Court website