Nolan & Anor v R

Section 35 of the Tax Credits Act 2002 requires proof that the defendant was knowingly concerned in fraudulent activity undertaken with a view to obtaining tax-credit payments. The conduct must be calculated to secure payments prospectively. Conduct which merely exploits payments already procured by another person’s completed fraud does not meet that requirement. Accordingly, knowingly allowing overpayments to enter an account and dishonestly withdrawing or spending them is insufficient under section 35 unless the conduct itself helped to obtain the payments.

The appellants pleaded guilty at Liverpool Crown Court to substantive offences under section 35 of the Tax Credits Act 2002. A tax-credit officer had manipulated their claims so that excessive payments were made into their bank accounts.

Each appellant knew that she was receiving payments to which she was not entitled and continued to use the money. Nolan had also signed a review form confirming inaccurate details. The Full Court raised whether passive receipt of the overpayments, and failure to report them, disclosed the statutory offence. Leave to appeal was granted to Nolan and granted to Howard on her referred application.

1. The appeals were allowed and both convictions were quashed as not made out in law.

2. Section 35 of the Tax Credits Act 2002 criminalises being knowingly concerned in fraudulent activity undertaken with a view to obtaining tax-credit payments. The statutory language requires proof of behaviour calculated to achieve the obtaining of payments. It does not extend to behaviour calculated only to capitalise on a fraud that has already achieved that result.

3. The particulars alleged that each appellant knowingly permitted payments to which she was not entitled to enter her account. The Crown’s case was that, when each appellant became aware of the overpayments, the officer’s fraudulent manipulation of the claim had already occurred. Permitting continued use of the account did not prove that either appellant acted so that the officer could perpetrate the fraud prospectively.

4. The dishonest spending or withdrawal of funds was capable of constituting offending under differently framed charges, but it did not establish the charged section 35 offence. Although there were factual differences between the appellants, justice required the same resolution in both cases.

• Court of Appeal (Criminal Division) Allowed both appeals and quashed the convictions under section 35 of the Tax Credits Act 2002.
• Crown Court at Liverpool Before His Honour Judge Gilmour QC, both appellants pleaded guilty to substantive tax-credit fraud offences on 7 February 2011 and received suspended sentences on 15 April 2011.