Are you aware of the new corporate criminal offence for facilitating tax evasion?

Oct 09, 2017

The Criminal Finances Act 2017 introduced, from 30 September 2017, the new corporate criminal offence of failure to prevent the facilitation of tax evasion. The legislation covers both the evasion of UK and offshore taxes.

HMRC has published guidance about the offence and the obligations it imposes which also contains details of suggestions of the types of processes and procedures that can be put in place to prevent associated persons from criminally facilitating tax evasion. HMRC guidance on self-reporting of offences is also available.

The legislation introduces two new criminal offences which mean corporations and partnership can now be criminally liable when they fail to prevent their employees, agents, or others who provide services on their behalf from criminally facilitating tax evasion. This can therefore include the actions of professional advisers, such as accountants.

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. Where offshore taxes are evaded, any company that is incorporated under the law of the UK, carrying out a business or part of a business in the UK, or has staff criminally facilitate evasion from within the UK, can be liable.

The new act is a landmark change from existing legislation under which companies can only be found liable for criminally facilitating tax evasion if the most senior members of the organisation (usually its board of directors) are aware of the facilitation.

The main defence against this new legislation is for the relevant body to be able to demonstrate that it has implemented ‘reasonable prevention procedures’ to prevent the criminal facilitation of tax evasion by an associated person.