Today the Government has published guidance for the corporate tax evasion offences which come into force on 30 September (click here to view the guidance). This will be of particular interest to businesses in the financial and professional services sector who are at highest risk of unwittingly committing offences. The two new offences, contained in the Criminal Finances Act 2017, attribute criminal liability to businesses when those associated with them facilitate criminal tax evasion. The first offence applies to businesses based anywhere in the world in relation to the facilitation of tax evasion in the UK. The second offence applies to businesses with a UK connection in relation to the facilitation of tax evasion abroad (where the conduct is criminal tax evasion both in the UK and the other jurisdiction). The definition of associated persons is wide, being employees, agents, and all persons (both natural and corporate) performing services for or on behalf of the business.
The new law therefore raises the spectre of businesses being prosecuted in relation to activity they may be unaware of, and have little practical control over, in jurisdictions they may not even be doing business in. Further, unlike the Bribery Act, on which these offences are modelled, there is no requirement for there to be an intention that a business will benefit from the activity, for the above offences to be committed.
The Act provides that it will be a defence for a business to show that it had "prevention procedures" which it is reasonable in the circumstances to expect the business to have in place to prevent the facilitation of tax evasion. The guidance published today sets out the principles that it is expected a business will consider as part of its prevention procedures, namely:
- Risk assessment
- Proportionality of risk based prevention procedures
- Top level commitment
- Due diligence
- Communication (including training)
- Monitoring and review
In light of the specific defence in the Act, and the guidance published today, businesses would be well advised to implement reasonable prevention procedures if there is any risk of facilitation of tax evasion by those deemed to be associated with it. Those businesses that do not implement the recommended procedures, when they should have, will not be able to defend themselves properly if faced with prosecution and they will run a greater risk of conviction and penalties.
Sign up to our email digest