Tax evasion corporate criminal offence guidance updated

HMRC has finalised guidance on the corporate criminal offence of failing to prevent the facilitation of tax evasion, which requires businesses to implement ‘reasonable prevention procedures’ to meet the demands of the legislation, which comes into effect at the end of this month

The Criminal Finances Act 2017 introduced the new corporate offence of failure to prevent the facilitation of tax evasion. HMRC says its guidance needs to be used ‘to inform the creation of bespoke prevention procedures designed to address a relevant body’s particular circumstances and the risks arising from them’.

The aim is to encourage ‘a more effective, risk-based and outcomes-focused approach’, so while the guidance contains a number of examples of possible actions by different types and size of organisation, it does not provide a checklist for all eventualities.

The guidance states: ‘The onus will remain on the relevant organisation, where it seeks to rely on the defence, to prove that it had reasonable prevention procedures in place (or that it was unreasonable to expect it to have such procedures).

‘Ultimately only the courts can determine whether a relevant body has reasonable prevention procedures in place to prevent the facilitation of tax evasion in the context of a particular case, taking into account the facts and circumstances of that case.’

HMRC also warns that the prevention procedures that are considered reasonable will change as time passes. It says the government accepts that some procedures (such as training programmes and new IT systems) will take time to roll out, especially for large multinational organisations. HMRC will therefore take into consideration the prevention procedures that were in place and planned at the time that the facilitation of tax evasion was committed.

David Sleight, a criminal litigation partner at law firm Kingsley Napley, said: ‘The new corporate offence is somewhat of a gift to HMRC and they will be very keen to demonstrate that the “failure to prevent” legislation has teeth.  With the new offence in force from 30 September, companies should be urgently considering the guidelines and critically assessing the adequacy of their existing systems and controls now.’

‘Be warned though the guidance expressly states that it is not a one-size-fits-all approach. The document is not a checklist of things that all relevant bodies must do to reduce their risk of liability under the corporate criminal offences, and should not be used as such.

‘Bespoke prevention procedures will need to be put in place to address particular circumstances and the risks arising from them.’

In its assessment of the guidance, KPMG highlights the emphasis on risk assessment as a key part of the process. Critically, it is now explicitly stated that it must be ‘documented and kept under review’.

Within the actions for lower risk SMEs, the suggestion for financial crime training now specifically advises that prevention of facilitation training be included. This flags training as a key control to be included within reasonable procedures.

The Facilitation of Tax Evasion Offences (Guidance About Prevention) Regulations 2017 are here.

Tackling tax evasion: Government guidance for the corporate offences of failure to prevent the criminal facilitation of tax evasion is here.

Report by Pat Sweet

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