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The new corporate offence of failure to prevent the facilitation of tax evasion

Print publication

21/09/2017

Part 3 of the Criminal Finances Act 2017, creating the corporate offences of failure to prevent facilitation of UK and foreign tax evasion, comes into force on 30 September 2017. Similar to the existing failure to prevent offence under the Bribery Act 2010, it will be a defence for the company to prove that when the offence was committed they had put in place prevention procedures.

The Criminal Finances Act 2017 (CFA) received Royal Assent at the end of April 2017. It created a new corporate offence of failing to prevent facilitation of UK and foreign tax evasion. The new offence comes into force on 30 September.

The offence of corporate failure to prevent criminal facilitation of tax evasion applies to companies, partnerships and LLPs. It does not apply to individuals.

An offence will be committed if:

  • there is criminal tax evasion under either UK law or foreign law;
  • it is enabled by the business’¬†employee, agent or those performing services to the business; and
  • the business fails to prevent that person from enabling the crime.

If convicted a business will face an unlimited fine.

Similar to the existing failure to prevent offence under the Bribery Act 2010, it will be a defence for the company or organisation to prove that when the offence was committed they had in place prevention procedures. Prevention procedures are defined as procedures designed to prevent persons acting in the capacity of a person associated with the company from committing tax evasion facilitation offences.

Section 47 of CFA required the Chancellor of the Exchequer to publish guidance about the procedures that relevant bodies might put in place. This guidance was published in its final form on 1 September 2017 and can be found here. Reasonable procedures will include:

  • risk assessments;
  • due diligence;
  • training for employees;
  • a commitment from top-level management to create a culture where tax evasion is never acceptable.

WM comment

It is important that all companies review their compliance manuals to ensure that prevention procedures are put in place to ensure that the defence can be relied upon if necessary. Please contact us if you would like help in this regard.

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