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Since 30 September 2017, companies and partnerships that do not have reasonable procedures in place to prevent employees, agents or subsidiaries from facilitating tax evasion may be prosecuted.
There are two types of criminal offence:
These criminal offences were created by sections 45 and 46 of the Criminal Finances Act 2017.
There are three elements to both the UK and the non-UK offences which the prosecution has to prove in order to convict:
For the non-UK offence, two additional conditions must be met:
It is a defence for the company or partnership to prove that when the tax evasion occurred, it had reasonable procedures in place to prevent the facilitation, or that it was not reasonable in all the circumstances to expect them to have any prevention procedures in place.
HMRC have recently released a Freedom of Information (FIO), outlining the number of live corporate criminal offences investigations. Click here for more information.
Please contact Patrick Cannon for an initial discussion or advice.
These two offences are complicated to prosecute because they first require there to be two underlying tax offences – the tax evasion itself, plus the offence of being knowingly involved in or taking steps with a view to the fraudulent evasion of tax by another person, i.e. the facilitation offence.
These two underlying offences can each be very difficult to prove on their own. It may be that – except in cases where the evidence is clear or the tax evasion is admitted – these two new offences will be unlikely to lead to prosecutions and may serve more as a “keep off the grass” warning to corporates.
To be safe, companies and partnerships need to have solid tax evasion facilitation prevention procedures in place. HMRC guidance suggests six guiding principles:
HMRC has published guidance on self-reporting tax evasion facilitation offences. By self-reporting, the company or partnership can use that as part of its “reasonable procedures” defence.
If the business is prosecuted, prosecutors will take such a report into account and it may assist in mitigating penalties.
If a successful prosecution for either offence is made out, the company or partnership faces an unlimited fine and ancillary orders such as confiscation or serious crime prevention orders.
If your organisation is at risk of exposure to these offences or would like advice on whether its prevention procedures are reasonable in the circumstances, please contact Patrick Cannon for an initial discussion or advice.