It’s already a crime to evade tax, or deliberately help another person to do so, but the government has taken a firmer stance on corporate fraud.
In this blog post, I’ll outline the new criminal offences and provide advice on how you can prevent the criminal facilitation of tax evasion.
The Criminal Finances Act 2017 introduced two new criminal offences in September 2017 – one applying to the evasion of UK taxes and one applying to the evasion of foreign taxes.
The new offences do not radically alter what is criminal, it simply focuses on who is held to account for acts contrary to the current criminal law.
The offences hold corporations and partnerships criminally liable when they fail to prevent their employees, agents, or others who provide services on their behalf from criminally facilitating tax evasion.
This is a significant change from existing law under which they can only be found liable for criminally facilitating tax evasion if the most senior members of the organisation – typically the board of directors – are aware of the facilitation.
However, there is a potential defence against these offences by putting a system of reasonable prevention measures in place for your business.
How you can mitigate the risk – understanding and prevention
The Government has published guidance on what corporations and partnerships can do to prevent the criminal facilitation of tax evasion.
The guidance can be found here: Corporate offences for failing to prevent criminal facilitation of tax evasion and will help you to understand the offences and take a more effective approach to mitigating the risk of your business failing to prevent its representatives from criminally facilitating tax evasion.
It includes the types of processes and procedures that your business can put in place to limit the risk. These include:
- risk assessment;
- proportionality of procedures;
- top level commitment;
- due diligence;
- communication and training;
- monitoring and review.
What are the implications?
Where there is evasion of UK taxes, any company based anywhere in the world can be liable, regardless of whether it has a business presence in the UK. HMRC uses the full range of both criminal and civil powers to investigate tax cheats, and is successful in more than 90% of the prosecutions undertaken.
The Financial Secretary to the Treasury, Mel Stride MP said: “Tax evasion is a crime and takes away from the money we need to fund our vital public services. The vast majority of businesses play by the rules but we must ensure that those that don’t are accountable for their actions. The new offences will ensure that companies doing business in the UK take reasonable steps to prevent their staff from facilitating tax evasion”.
How we can help
We are able to help you perform a risk assessment and help install appropriate procedures. If you would like to discuss the implications for your business in more detail please do contact me.