Part 3 The Criminal Finance Act 2017 (CFA 2017) introduced legislation for corporate offences of failure to prevent facilitation of tax evasion. The legislation is brought into effect by SI 2017/739 from 30 September 2017 although section 47 “Guidance about preventing facilitation of tax evasion offences” which was brought into force on 17 July 2017.
Facilitating tax evasion (as well as tax evasion) is already a criminal offences although attributing criminal liability to a corporation or partnership has been difficult. Part 3 CFA 2017 will assist greatly to do this.
The legislation applies to a “relevant body” and “acting in the capacity of an associated person” (S44 Pt3 CFA 2017), which is broadly defined as a body corporate or partnership. A partnership may be incorporated or otherwise. A person acts in the capacity of a person associated with the company or partnership if they are an employee acting in that capacity and agent acting in that capacity or any other person who performs services for an agent acting in that capacity.
The offences include the failure to prevent facilitation of UK tax evasion (S45 pt3 CFA 2017) and foreign tax evasion (S46 pt3 CFA 2017).
UK tax evasion offence means:
“(a) an offence of cheating the public revenue, or
(b) an offence under the law of any part of the United Kingdom consisting of being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax.”
UK tax evasion facilitation offence means:
“(a) being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax by another person,
(b) aiding, abetting, counselling or procuring the commission of a UK tax evasion offence, or
(c) being involved art and part in the commission of an offence consisting of being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax.”
The definition of foreign tax evasion and facilitation are similar (see S46 pt3 CFA 2017).
There is a defence if it can be proven that, when the UK tax evasion facilitation offence was committed:
- prevention procedures as it was reasonable in all the circumstances to expect were in place, or
- it was not reasonable in all the circumstances to expect any prevention procedures to be in place
Section 47 pt3 CFA 20-17 makes provisions for the Chancellor to prepare and publish guidance about procedures that relevant bodies can put in place. HMRC’s draft guidance includes examples of what would constitute reasonable procedures to take to prevent the facilitation of tax evasion. Guidance for relevant bodies to:
- Undertake a risk assessment to identify the risks of facilitation
- Implementing procedures to manage risks identified in the risk assessment
- Implement a due diligence process over staff, third parties and clients in proportion to the risks that they pose to the business
- Ensure management within the organisation are involved and committed to preventing the facilitation of tax evasion
- Implement communication and training programs for employees and third parties
- Actively monitor and review procedures and risk assessments
A relevant body guilty of an offence can be liable to prosecution and an unlimited fine (excluding a summary conviction in Scotland or Northern Ireland where it may not exceed the statutory maximum).