Yip, R.

For offences concerning criminal property, the prosecution may prove the criminal source either by identifying unlawful conduct or by circumstances which make crime the only rational source. A failure to declare legitimately earned income to HMRC is not, without more, criminal conduct. An allegation of cheating the Revenue requires credible evidence of a false statement and an intention to defraud the Revenue.

Where an acquittal establishes that an identified sum is not criminal property, the jury must be directed to take that conclusion into account when deciding related criminal-property counts. A failure to give that direction may render convictions unsafe.

The appellant was convicted at Cardiff Crown Court of acquiring criminal property and removing criminal property from England and Wales, contrary to the Proceeds of Crime Act 2002. The counts concerned insurance proceeds paid after the loss of a car and a subsequent transfer of money to Hong Kong.

The Crown alleged that the money used to buy the car derived from criminal conduct. It relied alternatively on undisclosed income said to amount to cheating the Revenue. The appellant had been acquitted of a separate count concerning a £4,000 loan from Egg Banking PLC, which he said had contributed to the car’s purchase price.

He appealed against the convictions on Counts 6 and 7 on grounds concerning sufficiency of evidence and the jury directions.

1. Appeal allowed. The convictions on Counts 6 and 7 were unsafe and were quashed.

2. The first ground failed. The court applied R v Anwoir [2009] 1WLR 980: criminal property may be proved either by identifying specific unlawful conduct or by evidence which permits the irresistible inference that the property could only derive from crime. That approach also applied to section 329 of the Proceeds of Crime Act 2002. On the evidence of the appellant’s finances and dealings, the judge was entitled to leave that inference to the jury.

3. The second ground succeeded. Mere failure to declare income from legitimate trade, investments, dividends, interest or capital gains does not itself amount to unlawful conduct. If the Crown relied on cheating the Revenue as the criminal conduct, it needed credible evidence of a specific offence. There was no evidence from which a properly directed jury could conclude that the appellant had made a false statement to HMRC intending to defraud the Revenue.

4. The third ground also succeeded. The judge gave examples of conduct which would not constitute cheating the Revenue, but did not direct the jury on its essential elements: a false statement to the Revenue and an intention to defraud it. The omission of the mental element was material.

5. The fourth ground succeeded. The acquittal on the Egg loan count meant that the £4,000 loan could not be treated as criminal property. Since that sum might have formed part of the car’s purchase price, the jury should have been directed to allow for it when deciding whether the insurance proceeds and transfer in Counts 6 and 7 represented criminal property. The contrary direction created a real risk of conviction on an erroneous factual and legal basis.

• Court of Appeal (Criminal Division): Allowed the appeal and quashed the convictions on Counts 6 and 7: [2010] EWCA Crim 1381.
• Crown Court at Cardiff: On 16 December 2009, convicted the appellant on Counts 6 and 7. On 26 January 2010, imposed a 24-month community order. No lower-court citation was stated.