The Criminal Finances Act 2017 has come into effect as part of tougher government action on corporate fraud, with the introduction of two new criminal offences which mean corporations and partnership are now criminally liable when they fail to prevent their employees, agents, or others who provide services on their behalf from criminally facilitating tax evasion
The legislation took effect on 30 September and covers both the evasion of UK taxes and the evasion of foreign taxes. 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 taxes other than UK 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 under the UK criminal law for failing to prevent their staff from criminally facilitating the evasion of foreign taxes.
The new act marks a significant change from existing law, under which companies 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.
Now the legislation is focussing on the failure to prevent the crimes of those who act for or on behalf of a corporation, rather than trying to attribute criminal acts to that corporation. This includes the actions of professional advisers, such as accountants.
Mel Stride, financial secretary to the Treasury, 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.’
The main plank of a defence against the new criminal charges is for the relevant body to be able to demonstrate that it has put in place ‘reasonable prevention procedures’ to prevent the criminal facilitation of tax evasion by an associated person (or where it is unreasonable to expect such procedures). Last month HMRC published guidance which provides suggestions of the types of processes and procedures that can be put in place to prevent associated persons from criminally facilitating tax evasion.
Tackling tax evasion: Government guidance for the corporate offences of failure to prevent the criminal facilitation of tax evasion is here.
Report by Pat Sweet
