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The Corporate Criminal Offence remains a key risk area for charities

16 December 2019

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.

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.

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.

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