Protecting yourself from the new Corporate Criminal Offence 'failing to prevent the facilitation of tax evasion'

17th July 2018 Business Crime

HMRC Fraud Service are actively pursuing businesses for 'failing to prevent the facilitation of tax evasion'

Colleagues and I were recently invited to a briefing hosted by HMRC's Fraud Service in respect of the corporate criminal offence which came into force on 30 September 2017 by The Criminal Finances Act 2017. HMRC advised us that they are now actively implementing this piece of legislation, which make it easier for them to prosecute a company.

This relatively new offence subjects business entities to criminal liability if they fail to prevent those who act for them, or on their behalf, from criminally facilitating tax evasion. It is a strict liability offence and therefore businesses can be criminally liable if they knowingly or unknowingly facilitate tax evasion either in the UK or anywhere overseas,

Who does this apply to?

The offences cannot be committed by individuals. Only a 'relevant body' can commit this offence. This is defined as a 'body corporate or a partnership' wherever incorporated or formed. This is a very wide test and will apply to employees, but also to third parties acting on behalf of the company and will include contractors and sub-contractors.

The reality is that this will apply to all companies, whatever their size and businesses will need to show compliance with the legislation proportionate to the risks of that company.

Individuals can be prosecuted under separate existing laws.

What steps should businesses be taking to prevent a criminal investigation?

HMRC advised that they expect organisations to have undertaken a risk assessment and be able to show that they have a compliance plan consistent with the new legislation.

We can assist you to carry out a risk assessment on your business. We can also advise and help you implement robust procedures to ensure compliance and avoid prosecution..

HMRC said that they are actively looking at all companies; from small/medium businesses to large corporations and expect businesses to have reviewed their procedures, have written policies in place, have trained their staff, to be able to demonstrate due diligence and a whole host of other requirements,

Self reporting

HMRC have provided details of how you can 'self report' any acts of facilitation that you may discover within your business. However, they could not give any assurances that self-reporting would protect you from prosecution. Timely self-reporting may be viewed as an indicator that a business has reasonable procedures in place and may be taken into account when deciding if and when prosecution is appropriate.

Should I be concerned?

If your business hasn't conducted a risk assessment or implemented a compliance plan you may be leaving yourself open to a potential prosecution. You will have to show you either have 'reasonable prevention procedures' or be able to demonstrate that it is unreasonable to expect such procedures to have been put in place. This is a subjective term that will vary from business to business It is a strict liability offence and unless the business can show it has put in place reasonable prevention procedures, it will have committed the new corporate offence.

What are the penalties?

Penalties can be an unlimited financial penalty, a public record of conviction and potential implications on the ability to trade. Any businesses successfully prosecuted will inevitably suffer adverse publicity and potentially reputational damage.

If you would like to know more about the new offences we can help you and your business prepare for the new legislation and you should contact a member of our Business Crime and Regulatory Team on 0800 652 5559 or complete our online enquiry form and a member of the team will call you back as soon as possible. 

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Peter Grogan is a Head of Department located in Manchester in our Business Crime, Regulation & Driving Offences department

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