Ahmad & Anor v R

For confiscation purposes, property obtained merely as a necessary cost or mechanism of committing an offence is not thereby obtained in connection with the offence. Expenditure cannot be deducted from criminal benefit, but it cannot be added to that benefit merely because it facilitated the crime. In an MTIC carousel fraud, funds passing through buffer-company accounts to give effect to the fraudulent transactions were not additional benefit on that basis. Under Criminal Justice Act 1988, a court must assess realisable assets on the evidence as a whole. A defendant’s concealment of assets makes the burden difficult to discharge, but does not automatically require an order for the full benefit figure.

The appellants were convicted of conspiracy to cheat the public revenue through an MTIC carousel fraud. Following a 31-day confiscation hearing, Flaux J made confiscation orders of £92,333,667 against each appellant under the Criminal Justice Act 1988.

The judge treated as benefit both the VAT loss to HMRC and the total funds passing through bank accounts controlled by the appellants’ company. He also found that the appellants had hidden assets and had not shown that their realisable assets were less than their benefit.

The appeals raised two principal questions: whether the account receipts were property obtained in connection with the offence, and whether concealment of assets compelled an order for the whole benefit figure.

1. The appeals were allowed in part. The court quashed the confiscation orders of £92,333,667 and substituted orders of £16,145,098 against each appellant. That figure comprised the VAT loss of £12,662,822, uplifted for inflation.

2. Section 71(4) of the Criminal Justice Act 1988 required the court to identify property obtained as a result of, or in connection with, the offence. The phrase had to be read with the statutory concept of benefit. It did not make the costs of committing an offence part of the offender’s benefit. A criminal cannot deduct operational costs from property genuinely obtained through crime, but nor may the value of those costs be added to the benefit figure.

3. The money passing through the buffer-company accounts was a necessary mechanism, and therefore a cost, of the carousel fraud. It was not additional property obtained in connection with cheating the Revenue. The actual benefit was the VAT fraudulently obtained. The court held that R v Waller [2008] EWCA Crim 2037, which treated the purchase cost of tobacco as benefit in comparable circumstances, was clearly wrong and should not be followed.

4. On realisable assets, the court agreed with R v McIntosh and Another [2011] EWCA Crim 1501. A finding that a defendant has concealed assets does not itself compel an order for the full benefit. The statutory question remains what amount appears realisable on all the evidence. Here, however, the appellants’ profits and hidden assets justified orders for the revised benefit figure.

5. The ten-year consecutive default terms and the two-month period for payment remained in place. Leave to appeal on the payment period was refused, as were the renewed unargued grounds.

• Court of Appeal (Criminal Division): Allowed the appeals in part and substituted confiscation orders of £16,145,098 for each appellant: [2012] EWCA Crim 391.
• Crown Court at Leicester (Flaux J): On 5 July 2010, made confiscation orders of £92,333,667 against each appellant under the Criminal Justice Act 1988.
• Crown Court at Northampton: On 28 March 2007, each appellant was convicted of conspiracy to cheat the public revenue; each was sentenced to seven years’ imprisonment on 30 March 2007.