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Criminal Finances Act – it’s here

Rules and regulations clapper board

The UK’s new corporate offence of failing to prevent the facilitation of tax evasion is now in force.  Are you prepared?

Do you have procedures in place, or have you done a risk assessment to satisfy yourself that your current procedures are adequate to prevent the facilitation of tax evasion?

If you aren’t prepared you could be open to prosecution.

Who does it apply to?

Whether you do business in, or with the UK, you will need to be fully informed of the legislation and its impact on your business. Whilst it has always been a criminal offence to facilitate tax evasion, the new offence means that organisations that ‘turn a blind eye’ to, or are simply unaware of the criminal acts of persons representing them, may now be held to account.  And the scope is wide. Not only does it cover employees, but any person representing your business, including sub-contractors and agents.

The only defence to this new offence is the organisation putting in place ‘reasonable prevention procedures’  to ensure that its representatives are not facilitating tax evasion.

What is the new offence?

There are 3 stages to the new offence.

Stage one: there must be a criminal tax evasion by a taxpayer (either an individual or a legal entity) under existing law.

Stage two: there must be a criminal facilitation of the tax evasion by a person acting on behalf of your organisation.

Stage three: your organisation has failed to prevent the person from committing the criminal facilitation act.

Why is it important to act now?

If you fall short of the requirements set down by HMRC you will have no defence to the new corporate offence. The consequences of a successful prosecution are:

  • Unlimited financial fines
  • Possible revocation of licences and exclusion from public procurement processe
  • Reputational damage

How should you respond and how can we help?

There is no simple one size fits all system that will protect your business from the risk of prosecution. However.  HMRC has published draft guidance which suggests that the procedures put in place to prevent tax evasion from being committed on your organisation’s behalf should be informed by six principles.

  • Risk assessment
  • Proportionality of risk-based prevention procedures
  • Top level commitment
  • Due diligence
  • Communication (including training)
  • Monitoring and review

So what next?

You will need to ensure, if you haven’t already done so, that you undertake a risk assessment on all of your organisation’s activities so you can identify possible areas of risk and what procedures you need to put in place to address these.

In order to complete the risk assessment, your project teams will need to know what constitutes tax evasion.  The use of offshore trusts and accounts may be an obvious example, but what about the more subtle forms of evasion that are nevertheless caught by the law, and may be possible risk areas for your organisation?

Once your project team has identified possible areas of risk, you will need to put in place procedures, to demonstrate that as an organisation you are trying to prevent those acting on your behalf from facilitating tax evasion.  These procedures are likely to include training on what the offence means for the organisation, and policies and procedures that you have identified and implemented in order to address risk areas.

As a legal and tax training provider, we can help you with the training required to demonstrate compliance.

Contact our specialist team at now to support your organisation.

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