A new corporate offence of failure to prevent the criminal facilitation of tax evasion applied from 30 September 2017 to both companies and partnerships. This will effectively make a business liable for the criminal acts of its employees and other persons ‘associated’ with it, even if the senior management of the business was not involved or aware of the issue that gave rise to the offence.
A business will have a defence if it can prove that it had put in place reasonable prevention procedures to prevent the facilitation of tax evasion taking place (or that it was not reasonable in the circumstances to expect there to be procedures in place).
HMRC has published draft guidance on the offences in which it explains that there are six guiding principles that businesses should take into account in establishing reasonable prevention procedures. These are:
- risk assessment;
- proportionality of risk-based prevention procedures;
- top-level commitment;
- due diligence;
- communication (including training); and
- monitoring and review.
All businesses should undertake a risk assessment to identify the risks of facilitation of tax evasion within the organisation and the potential gaps in the existing control environment.
All businesses should be taking action now to ensure that they are aware of and have control over how their employees, agents or service providers are operating to reduce the risk of exposure to the new offences. Aside from the possibility of incurring a heavy fine, a successful prosecution could give rise to serious reputational damage for an organisation and is not something that businesses can afford to overlook.
For more information please contact Mark Abbs.