Winners And Losers In The End Of Parliament Wash-Up

Theresa May's decision to call a snap general election was a surprise to most. Several pieces of key legislation relating to tax avoidance and tax evasion were in the process of being considered by Parliament when the election was announced. In the close of Parliament wash-up period, the provisions were passed relating to the failure to prevent the facilitation of tax evasion, but the legislation relating to penalties for enablers of tax avoidance schemes has, for now at least, been shelved.

Criminal Finances Act 2017 - failure to prevent the facilitation of tax evasion

The Criminal Finances Act 2017 received royal assent on 27 April 2017, and makes provision for a number of important changes to the Proceeds of Crime Act 2002 and the laws governing money laundering. Of particular importance to tax advisors, accountants, lawyers and promoters of financial products, Part 3 of the Criminal Finances Act also introduced a new corporate offence of failure to prevent the facilitation of tax evasion in the UK or overseas.

Broadly, facilitation of tax evasion involves knowingly assisting another person (such as a client) by aiding, abetting, counselling or procuring them to commit a UK tax evasion offence. A professional firm could be found liable of the corporate offence if, for example, a partner, employee or agent, is found to have been involved in criminally facilitating tax evasion.

This offence was first announced in 2015 and is aimed at forcing boards and senior management to take positive pre-emptive measures to prevent their staff from facilitating tax evasion. The potentially unlimited fine in the event of a conviction should certainly focus the minds of most boards.

It is a strict liability offence. However, there is a defence, based on section 7 Bribery Act 2010, if a corporate body can demonstrate that it put in place prevention procedures which were "reasonable in all the circumstances" to prevent the facilitation of tax evasion offences. Draft guidance was published in October 2016 to assist relevant bodies to devise reasonable prevention procedures (such as undertaking risk assessments and training staff). Finalised guidance is expected imminently (subject to the general election) and then these provisions will come into force when the Treasury issues the commencement regulations.

In the meantime, professional firms will no doubt wish to...