Are You Prepared For The New Corporate Tax Evasion Offence?

Introduction

The corporate offence of "failing to prevent the facilitation of tax evasion" came into force on 30 September 2017. Now corporations must ensure that they have developed a plan for implementing "reasonable prevention procedures".

Offence

The offence, introduced under the Criminal Finances Act, makes corporations criminally liable in situations whereby:

There has been criminal evasion of UK or non-UK tax (by either an individual or a legal entity); an individual, acting on behalf of a corporation, facilitated the tax evasion; and the corporation did not have reasonable prevention procedures in place (or it is unreasonable to expect such procedures to have been put in place). The offence is strict liability; meaning that the knowledge or intention of the senior management is irrelevant. If convicted, corporations can face unlimited fines, on top of reputational damage and regulatory sanctions which come with a criminal conviction.

Wide-reaching

The new law applies to all businesses. It criminalises the failure to prevent the facilitation of evasion of both UK and non-UK tax.

The offence is not limited to facilitation by employees. Rather, the offence is deliberately wide so that corporations will be liable for anyone who performs services for them or on their behalf such as agents, contractors and sub-contractors.

Prevention procedures

Where facilitation is proved, the burden will be on the corporation to show that it had prevention procedures that were reasonable in all the circumstances. Although the law is silent on what such procedures are, HMRC's draft...