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The Corporate Criminal Offence remains a key risk area for charities

06 August 2020

The Charity Tax Group (CTG) this week provided an update highlighting that the Corporate Criminal Offence (CCO) is a high risk area for incorporated charities. Charities need to be aware of how this legislation impacts them and as the briefing attached to the CTG’s update highlights, doing nothing is not an option.

Further insight how the BDO Tax Risk team can support you, are found below:

What is the Corporate Criminal Offence?

The CCO legislation took effect on 30 September 2017.  Essentially, it created two new criminal offences, one relating to the evasion of UK tax and one relating to the evasion of foreign tax. The rules also apply to trustees of all incorporated charities, including charities registered as companies and charitable incorporated organisations, regardless of their size.  More information can be found in our article covering our top 10 FAQs.

What is the impact for charities?

The rules apply where a person acting on behalf of the incorporated charity, an employee or volunteer, knowingly facilitates tax evasion by someone else. Although tax evasion is an established illegal offence, the CCO provides a mechanism of being able to prosecute the incorporated charity itself.

Is there a defence for charities?

If a charity is found guilty of an offence, it can be found criminally liable even if it was unaware that tax was evaded in the first place. A defence however exists where an incorporated charity can demonstrate it had “reasonable procedures” in place at the time the offence took place, or it was unreasonable to have such procedures.

It is therefore crucial for Trustees to update their governance, policies and procedures to ensure they are compliant with these rules.

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Practical tips for charities and trustees

HMRC in its Guidance sets out 6 guiding principles which charities could use as a starting point on how to satisfy the “reasonable procedures” requirement, namely:

  • Risk assessment;
  • Proportionality of risk-based prevention procedures;
  • Top level commitment;
  • Due diligence;
  • Communication (including training); and
  • Monitoring review and testing.

There is no ‘one size fits all’ solution and each charity needs to turn its mind to how to manage its own risks in this context. Getting it wrong can lead to large financial penalties, trustee disqualification and/or reputational damage that can affect the charity’s operations and fundraising abilities going forward. 

BDO has extensive expertise in helping organisations, including incorporated charities and trustees, to understand the legislation and their requirements and we invite readers to find out more by clicking here.

In our experience, HMRC are increasing its activity in the charity sector and we are actively working with charities to resolve a range of tax disputes, guiding them along what can be an incredibly time consuming process. If you would like to speak to one of our experts further, please do not hesitate to contact Talia Greenbaum or Ezra Dulberg.

CCO Guide

This article was authored by Director Talia Greenbaum and Assistant Manager Ezra Dulberg.  

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How can BDO Tax Risk team support you?

All businesses continue to develop their response both to COVID-19 and also an evolving working environment post COVID-19. The challenges, and opportunities, of a remote workforce and the accelerating pace of digital change mean that different approaches to compliance, governance and regulation must be considered. 

It is important to ensure your reasonable prevention procedures are designed to prevent associated persons from commuting the facilitation offences in the new reality. 

This Toolkit provides your organisation with the tools, templates and knowhow to develop a response to the Corporate Criminal Offence legislation.

It is a step by step guide to ensuring that the controls you implement are aligned to HMRC’s Six Guiding Principles and meet the legislations requirements, including carrying out your own CCO Risk Assessment. The documentation includes various policies, internal and external messaging and example contractual terms.

Ensuring your staff and other associated persons understand their responsibilities is a critical control in minimising the risk of enforcement action. We have developed a bespoke elearning course to meet HMRC’s requirements.

The elearning module can be easily uploaded to your existing Learning Management System for staff distribution, or we can provide a platform through which you can distribute the training. This method of learning and embedding is well suited to remote working.

  • Risk assessments and ongoing monitoring

Where there are staff reductions, employees working from home, or management focused on critical functions only, unique opportunities arise for committing tax fraud. Risk assessments should be regularly reviewed, particularly within the context of COVID-19.

For businesses who have already performed a risk assessment, we can support with carrying out a review, which normally involves reviewing your existing policies and procedures as well as refreshing your current risk assessment to reflect any changes in the business.

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