The failure to prevent the criminal facilitation of tax evasion

From 30 September 2017 two new corporate offences came into force to prevent facilitation of tax evasion offences (“FTP”). It is now a criminal offence if a business fails to prevent its employees or any person associated with it from facilitating tax evasion.

Tax evasion and its facilitation are already criminal offences. However, to date it has been difficult to attribute criminal liability to a corporation or partnership. The new offences within the Criminal Finances Act make this possible. As these new offences are the political response to the ‘Panama Papers’ scandal, there is considerable political pressure to utilise the new legislation.

Who is affected?

They are corporate offences that apply to ‘relevant bodies’ (defined as ‘a body corporate or partnership (wherever incorporated or formed)’. So whilst an individual cannot be found guilty of the offences, all partnerships are treated as corporate entities for the purposes of the new legislation, and are in scope.

Relevant bodies are also not required to be in the UK tax system to be in scope of the offences.

No criminal intent, act or benefit 

The offences are strict liability offences so there is no need to prove criminal intent or action by the relevant body. The FTP offences also differ from the Bribery Act 2010 offences (on which they are based), as for FTP, the relevant body does not need to have benefitted from the criminal facilitation offence.

Investigation and sanctions

HMRC will investigate the UK offence and the SFO and the National Crime Agency have the remit to investigate offshore.

Unlimited fines, confiscation orders, serious crime prevention order prohibitions and restrictions can be imposed on organisations found guilty of the offence. Organisations should also consider the associated regulatory sanctions, disciplinary and professional sanctions and the reputational damage.

Avoiding prosecution

Having reasonable prevention procedures is the only defence (either by showing that these were in place, or exceptionally, by showing that they were not required).

Action required

It is crucial that businesses understand the risks and ensure that their internal procedures can adequately deal with the requirements of the legislation. Businesses are required to undertake an initial risk assessment to identify the risks posed and the potential gaps in their existing internal procedures/controls.

The implications of this new offence need to be considered and the actions required to minimise their risk of exposure.

For further information on this matter please contact Kate Gott or Craig Nicholson.

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