Legislation providing for new corporate criminal offences of failure to prevent the facilitation of tax evasion is now in effect.
The new offences, contained in the Criminal Finances Act 2017, will make businesses vicariously liable if an employee or other ‘associated’ person criminally facilitates tax evasion whilst acting in that capacity for the business, even if the senior management of the business was not involved or aware of what was going on.
Meanwhile, HMRC have been stepping up investment in their specialist fraud investigation unit, suggesting that they are gearing up for a crackdown on tax evasion. As a result of the new offences, which apply to both companies and partnerships businesses are likely to be firmly within HMRC’s sights.
Businesses will have a defence if they can prove that they had reasonable prevention procedures in place to prevent the facilitation of tax evasion, or that it was not reasonable in the circumstances to expect there to be a procedure in place.
Businesses now need to be focusing on conducting a risk assessment and drawing up an implementation plan to introduce new, proportionate prevention controls and procedures.
The consequences of falling foul of the new rules could be extremely costly. In addition to the damage to reputation and adverse media attention, a criminal conviction could make it more difficult for a business to win government contracts in the UK or overseas, or restrict it from operating in regulated markets.
Contact Sue Stephens for further information and advice.