Failure to prevent tax evasion – final HMRC guidance
13 September 2017
The HMRC has now published the final version of its guidance in relation to the failure to prevent the facilitation of tax evasion offences introduced by the Criminal Finances Act.
Failure to prevent tax evasion – The Act
The Act, which comes into force on 30 September 2017, introduces two new criminal offences whereby a corporate can be guilty of failing to prevent the facilitation of tax evasion, in the UK or overseas.
This is a strict liability offence meaning that, if an associated person (for example, an employee, agent or distributor) facilitates, or “aids and abets”, another to evade tax the organisation will be presumed guilty of the failure to prevent the offence, regardless of whether it knew about the criminality. The only defence to prosecution will be if the corporate can demonstrate that “reasonable prevention procedures” had been implemented by the company.
For some businesses, compliance with these new rules could involve significant changes to current compliance procedures and internal training programmes. For others, a limited and proportionate risk assessment analysis is likely to be sufficient to support a position that no further prevention procedures are necessary.
Changes to note
The HMRC guidance aims to assist organisations in understanding the new offences and what will be considered “reasonable” prevention procedures. The guidance remains largely unchanged from the draft version but there are a small number of important changes, as follows:
- it is now explicitly stated that a risk assessment must be “documented” and monitored to ensure it remains up to date and appropriate to risk;
- the guidance now states that an overseas organisation having only part of its business in the UK will be caught by the Act;
- there is an additional example in the guidance that makes it clear that if a high risk organisation operates in the UK and overseas, it is not sufficient to put in place prevention procedures in the UK only; and
- it is made clear that all areas of a business must be risk assessed, not just the customer facing roles.
As the guidance is now final, with guidance notes from other organisations, such as the BBA and Law Society, also expected within the coming weeks, all organisations should now take steps to complete a risk assessment and ensure it is documented ahead of the 30 September 2017 implementation date.
The finalised guidance can be accessed here:
If you would be interested in speaking with one of our experienced lawyers in relation to the new offences, we would be very happy to arrange a call to discuss further. In the meantime, by way of further information on the new offences, please review our FAQ document that may be of assistance to you.