Following initial consultation on the draft legislation, the new rules set out a regime whereby onshore and offshore tax evasion would be treated as separate offences.

The current consultation, running to 59 pages, follows on from a previous round of consultation, which ran from 16 July to 8 October 2015, focusing on the basic concept and policy decisions behind the introduction of a new corporate criminal offence.

HMRC says it is not re-visiting this question in the latest discussion document, but is seeking views on the drafting of the legislation and the accompanying guidance.

Initial feedback on the draft legislation issued last December criticised the merger of the offences between onshore and shore evasion.

Stakeholders said it would be clearer if the elements of the offence relating to a UK tax fraud and those relating to an overseas tax fraud were separated into separate offences, though both rely on a number of the same definitions.

In response, the government has prepared alternative draft legislation with this change to allow stakeholders to consider and comment on which form of drafting offers the greater clarity.

The offence as outlined in the consultation response document will have three stages. Stage one concerns criminal tax evasion by a taxpayer under the existing criminal law (for example an offence of cheating the public revenue, or fraudulently evading the liability to pay VAT).

Stage two applies to the criminal facilitation of this offence by a person acting on behalf of the corporation, by being knowingly concerned in, or aiding, abetting, counselling, or procuring the tax evasion by the taxpayer. Stage three relates to the corporation’s failure to take reasonable steps to prevent those who acted on its behalf from committing the criminal act outlined at stage two.

The draft legislation has been amended in the updated clauses to give greater clarity as to the meaning of ‘reasonable’ procedures. The consultation also asks for views on whether the offence and defence are sufficiently defined, and on how different relationships between an employee and a corporation would be viewed.

The previous consultation document outlined that the new offence would be committed where a person acting on behalf of the corporation criminally facilitated tax evasion. The requirement that the person be acting on behalf of the corporation means that the offence would be committed where an employee, during the course of his work, facilitated tax evasion by a customer of the corporation; but would not be committed where that same individual, outside of his work for the corporation, facilitated tax evasion by advising a member of his family, for example.

The draft legislation as now updated requires that the facilitation be done by a person acting in the capacity of a person associated with the corporation, defined as ‘someone acting on its behalf’.

HMRC says this will apply irrespective of whether the associated person is an employee or a contractor, as otherwise a corporation could seek to contract itself out of the scope of the new offence by always acting through contractors rather than employees.

As well as the updated draft legislation and guidance, HMRC provides a number of case studies to illustrate how the new law would work in practice, and is asking for those responding to the consultation to provide examples of how they currently respond to requests for referrals by a client to another individual or organisation. 

HMRC says the guidance intended to provide firms with details of the steps they can take to reduce the risk of their representative facilitating tax evasion, as well as helping them assess the adequacy of their systems and controls and remedy deficiencies.

The consultation closes on 10 July 2016.

The Tackling tax evasion:legislation and guidance for a corporate offence of failure to prevent the criminal facilitation of tax evasion consultation is available here