“Although this case focussed on anti-bribery rules rather than tax evasion, it demonstrates the attitude in the UK towards businesses that seek to circumvent the law and highlights that no business can afford to ignore UK rules targeted at corruption and tax evasion," said Penny Simmons, a tax expert at Pinsent Masons, the law firm behind Out-Law.com.
Skansen Interiors Ltd (SIL) was convicted for failing to have in place adequate procedures to prevent bribery. The former managing director of SIL and a former director of developer DTZ Ltd were imprisoned and disqualified from holding director-level positions as a result of the bribery, which involved a payment to the director of DTZ for confidential information which was intended to help SIL win commercial property contracts from DTZ.
Corporate criminal offences of failing to prevent the facilitation of tax evasion came into force on 30 September 2017. They effectively make a business criminally liable if an employee or other associated person criminally facilitates the evasion of tax by another person. The tax evasion offences operate in a similar way to the Bribery Act corporate offence in that there is a defence for a business which can show it has reasonable prevention procedures in place.
There are two tax evasion corporate offences offences. The first offence applies to all businesses, wherever located, in respect of the facilitation of UK tax evasion. The second offence applies to businesses with a UK connection in respect of the facilitation of non-UK tax evasion. The offences apply to both companies and partnerships..
"When sentencing SIL, the judge specifically referred to the need to prosecute 'cases of this kind to send a message about the necessity for companies to introduce policies and monitor policies which then lead to the prevention of bribery and corruption.' Substitute the words 'bribery and corruption' with 'tax evasion' and this is exactly the kind of case that may well reach the court in the not too distant future, where a company has failed to prevent one its employers or associated persons from facilitating tax evasion," Simmons said.
"This case should serve as a warning to businesses that they cannot afford to delay completing a risk assessment to identify any tax evasion risks that they face and introducing new/enhanced controls to reduce these risks," she said.
Guidance from HM Revenue & Customs recommends that a business first undertakes a risk assessment to identify the risks of facilitation of tax evasion within the organisation and the potential gaps in the existing control environment. It is expected that following a risk assessment most businesses will have to introduce changes to ensure that they have robust procedures in place to prevent their employees, service providers, agents, suppliers and customers from engaging in or facilitating tax evasion.
"By now businesses large and small should be able to demonstrate that they have reasonable prevention procedures in place, or have an implementation plan to introduce new/enhanced controls. If they have not yet started to review their tax evasion prevention procedures, commencing a review and risk assessment should become a priority,” Penny Simmons said.
Employment tax compliance can be a particular risk area for the new offence, according to Simmons. "This will be a particular concern for those with large numbers of off-payroll workers. By way of example, an employee who deliberately turns a blind eye to a contractor misrepresenting their position could be facilitating tax evasion, exposing their employer to criminal liability," she said.