Guidance reminds companies of duty to prevent tax evasion

From 30 September 2017 businesses can be criminally liable if their employees, agents or third parties facilitate tax evasion while acting on their behalf. Companies will not be liable if they can prove that they had reasonable prevention procedures in place or that it was not reasonable in the circumstances to expect there to be procedures in place.

HMRC has published update guidance for companies to help them understand how to self-report about a failure to prevent the facilitation of tax evasion leading to an offence under the Criminal Finances Act 2017.

Tax expert Penny Simmons of Pinsent Masons, the law firm behind Out-Law.com, said: "17 months have passed since the offences were introduced, so HMRC will expect a business to have conducted a comprehensive risk assessment and to have introduced new and enhanced controls to reduce the scope for facilitation of tax evasion by its employees and those providing services in its name."

She said that the guidance should remind companies that they should have control procedures in place. "The reminder is particularly apt given that HMRC has recently begun its first criminal investigations under the offences," she said.

"Beyond conducting a risk assessment, by now you would also expect a business to have provided tax evasion training to its staff including what action to take if suspicion of facilitation of tax evasion arises," said Simmons. "Given the time that has passed since the offences became law, many businesses should now also be considering reviewing the effectiveness of enhanced controls implemented in response to the initial risk assessment. HMRC has been clear that it expects businesses to be regularly reassessing their risks - a one-off risk assessment is not enough."

"HMRC has said that in its first criminal investigations under the offences it asked employees about their employers' tax evasion prevention procedures," she said. "This again highlights the importance of training staff and that a business will not be able to rely on a defence of having reasonable prevention procedures if procedures have not been fully communicated across the business and sufficient training has not been given to staff."

Self-reporting under the law is voluntary and Simmons said that, in line with HMRC guidance, companies should seek professional advice before self-reporting.

Successful prosecution under the offences could result in unlimited financial penalties, ancillary orders such as confiscation orders or serious crime prevention orders, and serious reputational damage. A successful criminal prosecution may also prevent a company from bidding from public sector contracts.