'Failure to prevent' offences on course for September as legislation clears parliament

The Criminal Finances Act was one of the final pieces of legislation to receive royal assent during the 'wash up' period ahead of June's early general election. A truncated 2017 Finance Act has also received royal assent.

The government has previously indicated that the offences would come into force this autumn, before the first automatic exchanges of information under the common reporting standard (CRS) take place in September. Once elected, the new parliament will be required to pass a statutory instrument in order to give the new offences legal effect.

"Regardless of who wins, it is unlikely that this offence would be dropped as it would be politically very unpopular to do so," said tax expert Jason Collins of Pinsent Masons, the law firm behind Out-Law.com.

"Ensuring oversight will likely represent an added compliance burden for businesses. After the Bribery Act, this is the second example of the criminal law being developed to make companies responsible for what happens on their watch. The government is considering extending the law more widely with an offence of failing to prevent other forms of economic crime," he said.

The act contains two new offences which will effectively make a business vicariously liable for the criminal acts of its employees and other persons 'associated' with it leading to the facilitation of tax evasion, even if the senior management of the business was not involved or aware of what was going on. The first offence will apply to all businesses, wherever located, in respect of the facilitation of UK tax evasion. The second offence will apply to businesses with a UK connection in respect of the facilitation of non-UK tax evasion.

The offences will apply to both companies and partnerships. A business will have a defence if it can prove that it had put in place reasonable prevention procedures to prevent the facilitation of tax evasion taking place, or that it was not reasonable in the circumstances to expect there to be procedures in place.

The act also creates new 'unexplained wealth orders', which can be used to require those suspected of serious crime or corruption to explain the sources of their wealth; enables the seizure and forfeiture of proceeds of crime and terrorist money stored in bank accounts and certain personal or moveable items; and extends disclosure orders to cover money laundering and terrorist finance investigations, among other provisions.

Measures dropped from the Finance Act to speed up the passage of the legislation through parliament included planned restrictions on corporation tax deductions for interest payments, reforms to corporation tax loss relief and reforms to the substantial shareholding exemption. All of these provisions were due to have effect from 1 April 2017. A Conservative government will, however, press ahead with these changes after the general election if it returns to power, according to a cabinet minister.

"There has been no policy change," Treasury secretary Jane Ellison told the House of Commons ahead of one of the final debates on the legislation. "These provisions made a significant contribution to the public finances and the government will legislate for the remaining provisions at the earliest opportunity at the start of the new parliament."