This new guidance, published earlier this month, focusing on tackling tax evasion arises from the UK Criminal Finances Act 2017 which comes into force on 30 September 2017.
The Act has wide ranging implications including a new criminal offence if a company fails to prevent its “associated persons” from facilitating tax evasion by a third party.
The new offences will be committed where a relevant body fails to prevent an associated person criminally facilitating the evasion of a tax, and this will be the case whether the tax evaded is owed in the UK or in a foreign country.
An “associated person” is very broadly defined as any person or entity that provides services for or on behalf of the company, such as employees, agents, subsidiaries, sub-contractors, joint venture partners, or professional advisers. This includes accountants, lawyers, Financial Services firms and wealth managers.
Because the offence is one of failing to prevent, it is irrelevant whether or not the company was involved in the evasion, or if it was completely unaware of what its associated persons were doing. The only defence is for the company to show that it had in place “reasonable procedures” designed to prevent the facilitation of tax evasion.
This means that a company needs to tailor a compliance programme according to the risks it faces based on where, how and with whom it is doing business.
The published guidance also references the need for board level commitment, effective training, due diligence in relation to third parties, and regular monitoring to ensure effective implementation of policies and procedures.
HMRC will lead investigations in relation to the UK, while the Serious Fraud Office (SFO) will take the lead overseas. The new offences will attract substantial fines, confiscation of the proceeds of crime, and significant reputational damage. There is also the prospect of separate action by the regulator of any regulated entity, especially where the failures are considered to be systemic.
Companies need to act now as, technically, “reasonable procedures” ought to be in place by the end of the month, although there is likely to be some flexibility. Your board will not want to be the last to learn about this new law – or the first to receive a summons. A copy of the guidance can be found on the .Gov website.
Given HMRC’s increased focus on tax evasion and avoidance they are continuing to pursue users of Employee Benefit Trusts, which though previously legally and within the scope of tax regulations now fall foul of them due to retrospective legislation. The Bedrock team can help with settlement of EBTs, take a look at how we can assist in this earlier blog.
