We want to draw your attention to the implementation of the rules in the Criminal Finances Act 2017 creating an offence of corporate failure to prevent the facilitation of tax evasion.
The rules were set out in the Act, but were only to take effect once secondary legislation was passed. This has now been done. The Criminal Finances Act 2017 (Commencement No 1) Regulations, SI 2017/739, implements the rules from 30 September 2017.
The rules introduce a new offence. The offence is committed by a company where a person acting in the capacity of an associated person (e.g. an employee) facilitates an offence of fraudulent tax evasion or cheating the public revenue in relation to UK tax or foreign tax. In relation to foreign taxes the action must be criminal in both the UK and the relevant foreign jurisdiction.
A company may be able to resist any charge if it can show it had in place reasonable preventative procedures.
Importantly the Act requires the Chancellor of the Exchequer to publish guidance about the procedures that relevant bodies might put in place. This has now been published here (external site).
The guidance is careful to explain that it does not provide a ‘safe harbour’; “compliance with the guidance will not render a relevant body immune from prosecution”, and it also states that it should not be used as a check list. Nevertheless, given that having reasonable preventative procedures in place provides a potential defence, the guidance is important in deciding what measures are appropriate. The guidance identifies 6 Guiding Principles;
- Risk assessment
- Proportionality of risk-based prevention procedures
- Top level commitment
- Due diligence (in respect of persons who perform services on behalf of the organisation)
- Communication (including training)
- Monitoring and review
Overall, companies should assess their exposure in the expectation of implementation and consider whether their preventative procedures can be shown to be reasonable. Staff awareness of the obligations forms a vital part of this even if the company may have very little risk.