In a YouGov poll of more than 1,000 senior decision-makers commissioned by the firm, 76% of respondents said that they were not aware of the new offences, which were created by the 2017 Criminal Finances Act and are expected to be introduced by September 2017. Although large businesses are more likely to be caught out by the new offences due to their complex operating structures, 67% of those respondents employed by the largest firms were similarly unaware.
Tax expert Jason Collins of Pinsent Masons, the law firm behind Out-Law.com, warned that the criminal prosecution of a business for one of the new offences could effectively 'ruin' it. A criminal conviction could make it more difficult for a business to win government contracts in the UK or overseas, or restrict it from operating in regulated markets, he said.
"Businesses need to be aware of the raft of new tax evasion laws as the consequences for failing to comply could be extremely costly," he said.
"The financial services, accounting and legal sectors are likely to be most affected by the new legislation. These sectors will face the biggest challenges when it comes to carrying out risk assessments, and ensuring that adequate procedures are in place to prevent any potential facilitation of tax evasion," he said.
"However, other sectors are also at risk. One needs to make money to evade tax on it, and HMRC wants to make sure that large businesses are taking more notice of whether people who make money in their markets and supply chains are tax compliant. Businesses which pay large sums to consultants, do cross-border business, engage casual or itinerant labour and contractors, or handle goods and services where organised fraud is a risk are at high risk of falling foul of the new legislation," he said.
The greatest level of awareness about the new offences among respondents to the survey was among financial services and accountancy executives, 42% of whom said they were aware of the new laws. Awareness was lowest among manufacturing, construction and transportation and distribution executives, with 79%, 78% and 74% of respondents respectively saying that they were not aware.
This lack of knowledge is of concern because it could take time for businesses to implement any necessary changes to ensure that they have 'reasonable prevention procedures' in place before the new rules are fully in force, according to Collins. Boards will be required to 'set the tone from the top' and communicate any new policies across all levels of the organisation, while practical steps will also need to be taken to monitor and ensure enforcement, he said.
The Criminal Finances Act received royal assent at the end of last week. It will create two new offences which 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. 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 first new 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. The government has indicated that the offences will come into force this autumn, before the first automatic exchanges of information under the common reporting standard (CRS) take place in September, although a statutory instrument will be required after the general election to bring them into force.