HMRC crackdown on facilitation of tax evasion begins in earnest

A recent freedom of information request has shown that HMRC has 30 live investigations into the corporate criminal offence of failure to prevent tax evasion under the Criminal Finances Act 2017 ("CFA") underway, including in relation to "some of the UK's largest organisations". Nine criminal enquiries have been opened with a further 21 under review. HMRC states that these investigations cover sectors including financial services, oil, construction, labour provision and software development.

The CFA, which came into force on 30 September 2017, makes corporate entities with a UK connection (referred to as "relevant bodies") criminally liable where they fail to prevent persons associated with them from criminally facilitating tax evasion, whether the tax evaded is owed in the UK or overseas. A person is “associated” with a relevant body if they are an employee, agent, intermediary or other person who performs services for or on behalf of the relevant body. The definition is intended to be wide. The corporate offence is a strict liability offence, and the relevant body will therefore be liable unless it can demonstrate that it had "reasonable prevention procedures" in place to prevent the facilitation (or in rare cases that it was not reasonable to expect it to have such procedures). The fines for those found guilty of the offence are potentially unlimited and accordingly HMRC makes it clear that "organisations must take their responsibilities seriously and put in place reasonable procedures to stop the facilitation of tax evasion" or face the consequences.

To date no one has been prosecuted for the offence of failure to prevent the facilitation of tax evasion but that looks like it is about to change. The aim of such prosecutions is stated to be to change "industry practice and attitudes towards risk" and encourage "organisations to do more to prevent tax crime happening in the first place". This should act as a reminder to any organisations which have not taken steps to ensure they are not facilitating tax evasion to put in place reasonable prevention procedures or review the procedures already in place for their fitness for purpose. Having reasonable prevention procedures in place is a complete defence to the strict liability offence so the importance of having these procedures in place (particularly now HMRC is gearing up to prosecute this offence) cannot be underestimated.

Please contact the Fraud, Financial Crimeand Investigations team if you have any questions or concerns regarding a tax evasion issue, self-reporting, or reasonable prevention procedures.

https://www.gov.uk/guidance/tell-hmrc-your-organisation-failed-to-prevent-the-facilitation-of-tax-evasion