The Criminal Finances Act 2017 ('the Act') came into force on 30 September 2017. The Act imposes criminal liability on partnerships and companies that fail to prevent tax evasion by a member of staff or an external agent. It is a criminal offence for organisations to fail to prevent the facilitation of tax evasion. The organisation can be liable even if the business was not involved or even aware of the activity. A prosecution can result in an unlimited fine.
'Facilitation' includes activity such as being knowingly concerned in, aiding and abetting, counselling, procuring or otherwise taking part in tax evasion by a tax payer.
There is only one defence under the Act and that is where the organisation can show that at the time of the offence it had 'such prevention procedures at it was reasonable in all the circumstances to expect' to prevent associated persons from committing a facilitation offence or it was 'not reasonable in all the circumstances to expect' it to have those procedures in place.
The key point is that tax evasion was an offence before the Act came into force – but now it is possible for the firm where the office took place to be liable as well.
Firms should carry out immediate risk assessments of their services, products, clients and systems to consider whether any of these could be used to facilitate tax evasion.
Policies and procedures may need to be updated to minimise risks and training and monitoring of all staff at all levels should take place. Employees contracts may need to be updated and the whistle blowing policy must be fit for purpose. The larger the business, the more complex this exercise will be.
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