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Criminal Finance Act 2017 – Failing to prevent tax evasion

8th September, 2017

The Criminal Finance Act 2017 is due to come into force at the end of September. The Act provides that companies and partnerships will be criminally liable if they fail to prevent tax evasion by an employee or external agent.

The regulations cover taxes in the UK and overseas. To be liable there must have been:

  1. Criminal tax evasion by a taxpayer (individual or a firm);
  2. Criminal facilitation of the offence by a representative of the organisation;
  3. The organisation failed to prevent its representative from committing the criminal act (facilitation).

If prosecuted the organisation could be subject to conviction and unlimited penalties.

There is a defence available; it must be shown that the organisation had implemented reasonable prevention procedures or, in the circumstances, it would have been unreasonable and/or unrealistic to expect the organisation to have those procedures in place.

Government guidance recommends the following for applying reasonable procedures:

  1. Carry out a risk assessment of your products, services, client data and internal systems which could be used to facilitate tax evasion.
  2. Have written policies and procedures and allocate resources that are proportionate to your risk profile which will be revealed by the risk assessment referred to above.
  3. Management should communicate that activity intended to facilitate tax evasion is not acceptable.
  4. Use a risk based approach to check the procedures of anybody who performs services on behalf of the organisation. Appropriate due diligence should be carried out.
  5. All staff should be trained on understanding how offences are committed, consequences of non-compliance and how to respond to risks. They should be able to identify red flags.
  6. Prevention procedures should be monitored and reviewed regularly to ensure it remains up-to-date, appropriate and improvements are made where necessary.

If you need assistance with the above, and understanding your responsibilities, please contact our Professional Practices Department.

Paul Bennett

Partner in Professional Practices and Employment Law
Email: [email protected]
Tel: 01743 453685

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