The Criminal Finances Act 2017 (CFA), creates two new offences, for companies, LLPs and partnerships, of failing to prevent facilitation of tax evasion, both in the UK and overseas, which came into force on 30 September 2017. The purpose of the CFA is to hold companies and firms criminally liable where they fail to prevent those who act for them, or on their behalf, from criminally facilitating tax evasion.
To avoid corporate liability for failure to prevent facilitation of tax evasion, companies and firms should ensure that where appropriate they have strong, up to date and effective anti-evasion policies and systems in place.
The CFA makes failure to prevent facilitation of tax evasion a strict liability offence. The only defence is that a company or firm had in place reasonable procedures designed to prevent persons “associated” with it from facilitating tax evasion, or it was not reasonable in all the circumstances to expect it to have any prevention procedures in place.
The CFA has wide jurisdictional reach, covering UK based companies and firms, and foreign companies and firms carrying on business in the UK, and criminalises the conduct of individuals anywhere in the world.
HMRC has published draft guidance on the prevention procedures that should be adopted, which is designed to be of general application, and is formulated around the following six guiding principles:
- Risk assessment.
- Proportionality of risk-based prevention procedures.
- Top level commitment.
- Due diligence.
- Communication (including training).
- Monitoring and review.
The six principles are the same as those required to defend a charge under section 7 of the Bribery Act 2010.
Companies and firms should be considering what procedures they ought to put in place, including in relation to risk assessment, staff training, and engagement with third party service providers. If convicted of an offence of failing to prevent facilitation of tax evasion, a company or firm might be subject to a significant fine and suffer lasting reputational damage. DMH Stallard can provide advice and assistance on the steps that you should be taking in relation to the CFA offences.