New Corporate Criminal Offence Rules

31 Oct 2017

Abigail Owen, corporate partner at DMH Stallard LLP, explains the new corporate criminal offence of failing to prevent tax evasion, which came into effect from 30 September 2017 (Criminal Finances Act 2017).

When would the offence apply? Effectively, a business could be found guilty of a criminal offence if an employee or associated person (i.e. agent or someone performing services on behalf of the business) facilitates another person’s tax evasion and the business failed to prevent that person from enabling the crime. This applies even if the senior management of the business was not involved in, or aware of what was going on.

What are the implications for a breach? Failure to implement suitable procedures and compliance requirements against the offences taking place could result in companies or partnerships facing criminal prosecution if their employees or related counterparties facilitate tax evasion.

Who can be prosecuted? This new offence does not change existing laws on tax evasion but does make it easier to prosecute companies and partnerships, rather than an individual.  The business must have failed to prevent that person from enabling the crime.

Penalties for being found guilty? Heavy fines could follow for breaches. Also, if found guilty of an offence it could have serious reputational damage for any organisation.

What is the aim of the legislation? The aim is to require companies and partnerships to put in place reasonable procedures to prevent those providing services for or on its behalf from deliberately and dishonestly facilitating tax evasion, and this will be the case whether the tax evaded is owed in the UK or in a foreign country.

Action to be taken? The offences are expected to increase compliance requirements across all business sectors. Businesses are likely to have to conduct more due diligence in relation to their suppliers, contractors and employees and will probably have to look much more closely at where, and the way payments are made for goods and services, especially if offshore accounts are involved or payments are made in cash.

All businesses should be acting now to ensure that they are aware of and have control over how their employees, agents or service providers are operating to reduce the risk of exposure to these criminal offences.

Need any legal help? If you have any concerns on the implications of the new laws for your business or would like any guidance on practices and procedures to adopt, please contact Abigail Owen please see contact details below.

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