New teeth for HMRC – offence of failure to prevent the facilitation of tax evasion

The Criminal Finance Act 2017 has created a new corporate offence of failing to prevent the facilitation of tax evasion. The new offence means that companies can be prosecuted if they have failed to prevent tax evasion in the UK, and anywhere else in the world, committed by an ‘associated person’ of the company. An associated person would certainly be an employee, but could also include workers, contractors or consultants working for the company.

The new offence is a strict liability offence, which means that there is no need for the prosecution to prove that there was an intention to commit the offence; they just have to show to the criminal court that the offence happened and that the company failed to prevent it. Companies convicted can be liable to criminal conviction, unlimited fines and confiscation of their assets.

However, companies will be able defend themselves against an allegation that this offence has been committed if it can show that it had in place at the time of the offence being committed ‘reasonable prevention procedures’ to prevent its associated persons from committing such offences, or alternatively that it is unreasonable to expect such procedures to have been put in place.

The new offence has been created because HMRC has struggled to prosecute companies for facilitating tax evasion because it is difficult to attribute criminal liability to a company. The new offence makes this far easier for HMRC.

If your company deals with financial transactions or payment activities, then it would be worth being mindful of HMRC’s guidance and ensuring that your policies and procedures are reviewed and up-to-date. It may also be helpful to provide training to appropriate individuals to make sure there is awareness of the new offence.

If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.