Savings built up from tax evasion are criminal property (POCA 2002 s.340)
Rhiannon Lewis instructs Calder Vane, an SRA-authorised firm in Cardiff, to act on her purchase of a flat for cash. While discussing source of funds, she tells the conveyancing solicitor that the purchase money is savings from her catering business, which has always been run legitimately, but that for several years she deliberately left a large part of her takings off her tax returns 'like everyone does', so she has paid far less income tax than she owed. The money has been held in her ordinary savings account throughout.
Which of the following best describes the status of the savings under Part 7 of the Proceeds of Crime Act 2002?
Choose one answer to see the reasoning.
Worked answer
Correct answer D: They are criminal property, because evaded tax is a pecuniary advantage from criminal conduct, and the savings represent that benefit in part.
THE RULE TO REMEMBER
Property representing, in whole or part, a pecuniary advantage from criminal conduct such as tax evasion is criminal property where the person knows or suspects this (POCA 2002 s.340(3) and (6)).
Savings built up from tax evasion are criminal property (POCA 2002 s.340)
Under s.340(2) criminal conduct is conduct constituting an offence in any part of the UK; deliberately under-declaring income to evade tax is an offence. Under s.340(6), a person who obtains a pecuniary advantage as a result of or in connection with criminal conduct is taken to obtain a sum of money equal to its value, so the tax Rhiannon evaded is her benefit. Under s.340(3), property is criminal property if it constitutes or represents a person's benefit from criminal conduct 'in whole or part and whether directly or indirectly', and the alleged offender knows or suspects this. Her savings represent, at least in part, the unpaid tax, so they are criminal property. The firm must consider its reporting obligations and must not proceed with the purchase without appropriate consent.
Why A is wrong: The lawful origin of the takings does not matter; the evaded tax is a pecuniary advantage from criminal conduct under s.340(6).
Why B is wrong: Part 7 turns on knowledge or suspicion of benefit from criminal conduct; no conviction is required.
Why C is wrong: Part 7 applies to the benefit from any conduct that is an offence in the UK (s.340(2)), not only drugs or organised crime.
Why E is wrong: The threshold amount concerns deposit-taking bodies operating accounts; it does not limit what counts as criminal property here.
A little more practice done.
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