Tax Evasion is now a Corporate Offence: Implications for Companies
The Criminal Finances Act 2017 (“the Act”) received Royal Assent at the end of April 2017. The Act introduces new corporate offences of failure to prevent the facilitation of tax evasion, which is likely to come into force this Autumn. Modelled on the ‘failure to prevent bribery’ offence in the Bribery Act 2010, the offences are strict liability, meaning no necessity to prove intent on the part of the corporate entity to obtain a conviction. The offence is made out when the following three factors apply:
(1) there is criminal evasion of tax by the taxpayer;
(2) there was deliberate facilitation of (1) by an associated person (it must be a deliberate/dishonest act not negligent or unwitting conduct); and
(3) failure to prevent (2) by the company.
Comparable to the Bribery Act adequate procedures defence, a defence is available when a company can demonstrate it has “reasonable procedures” to prevent commission of the offence. The implication for companies is that they need to act now.
What action should be taken by companies?
§ Risk assessment – companies should conduct a thorough “tax evasion” risk assessment of their business and their contractual associations.
§ Procedures – there should be implementation of appropriate procedures to prevent the facilitation of tax evasion.
§ Training - appropriate staff should be trained on how to identify potential tax evasion to protect the company from the new offence.
§ Governance – senior management should be committed to changing the company’s culture.
§ Review – monitoring and frequent review of the risk assessment, mitigating controls, and training requirements will be important to exhibit that a robust framework is in place.
The legislation is intentionally tough and provides tangible powers for enforcement agencies. For this reason, companies should put measures in place immediately.
Posted on 05/25/2017 by Ortolan
