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  • Industry Issues

    Can you be criminally liable if you fail to prevent
    others from facilitating tax evasion?


Can you be criminally liable if you fail to prevent others from facilitating tax evasion?

26 September 2017

The new Corporate Criminal Offence of Failure to Prevent the Facilitation of Tax Evasion (“CCO”) legislation comes into force on 30 September 2017 as part of the Criminal Finances Act 2017.  Companies need to be able to demonstrate that they are taking reasonable steps to respond to the legislation as soon as possible.

The aim of the legislation is to make it easier to prosecute corporates if their associated persons (employees, agents or other third parties acting for and on behalf of the corporate):

  1. Knowingly aid, abet, counsel or procure tax evasion (say by a customer or supplier or its staff) and
  2. The company has not put reasonable prevention procedures in place to stop the facilitation of the evasion offence.

A successful prosecution could lead to an unlimited fine, public record of the conviction, reputational damage and adverse publicity.

The legislation broadly applies to:

  1. UK tax evasion regardless of whether your company is UK based or not and regardless of where the offence takes place.
  2. Overseas tax evasion to the extent your company is UK tax resident, has a UK permanent establishment, or associated persons are located in the UK when they knowingly facilitate tax evasion.

HMRC’s guidance focusses on six key areas to address in putting reasonable prevention procedures in place. The first of these is a Risk Assessment.  HMRC has been clear in stating that companies should prioritise the Risk Assessment and as the legislation takes effect from 30 September, it is important to start the Risk Assessment process now in order to help ensure they have a defence in place.

Some natural resources companies are particularly vulnerable to this piece of legislation given the widespread use of contractors and offshore payments. What needs to be done now is ensure that the Risk Assessment is completed as soon as possible by ensuring specific risks of tax evasion facilitation are identified, the controls in place documented and, where necessary, a plan put in place to mitigate those risks.

For more information or assistance, please contact Katherine Brown.

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