Part 3 of the Criminal Finances Act 2017 came into force on 30 September 2017 introducing two new strict liability corporate offences for failure to prevent the facilitation of tax evasion.
On 1 September, (and as required by the Act) HMRC published its final guidance in relation to the new offences entitled “Tackling Tax Evasion: Government guidance for the corporate offences of failure to prevent the criminal facilitation of tax evasion”.
The new offences are based on tax evasion, which is the dishonest omission, concealment or misrepresentation of information in order to reduce a tax liability. They do not apply to tax avoidance, which is not a criminal offence.
The legislation is intended to make it easier for an action to be brought against a Relevant Body, being either an incorporated entity or partnership. Under the new offences, Relevant Bodies will be held to account for their failure to prevent the criminal acts of its employees, agents or service providers.
The two new offences are: failure to prevent the facilitation of UK tax evasion (UK Offence); and failure to prevent the facilitation of foreign tax evasion (Foreign Offence).
What are reasonable preventive procedures?
The Guidance recommends that the prevention procedures should reflect the six principles of:
• Risk assessment;
• Proportionality of risk-based prevention procedures;
• Commitment of senior management to the process;
• Due diligence;
• Training and communication;
• Monitoring and review.
Organisations will need to review the risks and procedures on an ongoing basis to ensure that their procedures evolve as necessary to address the then current circumstances.
Organisations which haven’t already done so will need to give due consideration to identifying the particular types of risk that they may face and to the formulation of their own specific and proportionate procedures to address these.
For further advice in relation to this bulletin please contact Andrew Hill or Kate Parker on 01228 552600.