(The Criminal Finances Act 2017)
The Criminal Finances Act 2017 introduced 2 new corporate tax offences, extending liability for tax evasion from individuals and facilitators to corporate bodies.
The offences are:
- The failure to prevent the facilitation of UK tax evasion
- The failure to prevent facilitation of overseas tax evasion
For the offence to be committed:
- There must be criminal tax evasion under either UK law or foreign law
- It must be enabled by the organisation’s employee, agent or those performing services for, or on behalf of, the organisation
- The organisation must have failed to prevent that person from enabling the facilitation
HMRC suggest that entities implement reasonable prevention procedures to protect them in light of this new offence and their guidance suggests that corporate bodies should have the following:
- A documented assessment of the risks that a relevant body’s associated persons may commit tax evasion facilitation offences.
- Having a commitment to preventing the involvement of those acting on the relevant body’s behalf in the criminal facilitation of tax evasion, which might be demonstrated by issuing a prominent message from the Committee of Management (or the Senior Management Team) against all forms of tax evasion.
- An articulation of the approach to mitigating risks of involvement in the criminal facilitation of tax evasion, such as those arising from the nature of its services and areas of operation.
- An overview of the strategy and timeframe to implement prevention policies. It is expected that what is reasonable will evolve over time. For example, IT systems which form part of a relevant body’s due diligence procedures may take time to develop and subsequently review and amend.
- Monitoring and enforcing compliance with procedures that are clearly communicated to staff and suppliers.
- Regular review of procedures for effectiveness and refining of them where necessary.
- A clear pathway for reporting wrongdoing by persons associated with the relevant body.
- Protection for whistle-blowers (with no retribution).
- A commitment to compliance over profit or bonuses.
- Having terms in contracts (with employees and contractors) requiring them not to engage in facilitating tax evasion and to report and concerns immediately.
- Providing regular training for staff on preventing the facilitation of tax evasion, which may form part of wider financial crime detection and prevention training.
To be ‘reasonable’, prevention procedures should be proportionate to the risks that the organisation faces. Please note that all taxes are caught by this legislation and all businesses regardless of size or sector are also within its scope.
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Contact your local MFW office if you you need more tax support.