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A business is legally obliged to take steps to prevent an employee, agent or other associated people from facilitating tax evasion. If a business fails to do so, it may face criminal charges, potentially leading to an unlimited fine, a confiscation order and reputational damage.
Fraud and financial crime solicitors London
We have a dedicated team of fraud and financial crime solicitors. If your business has been accused of a corporate criminal offence, contact us now for a free, confidential discussion. We have offices in London, Leeds, Sheffield, Huddersfield and Dewsbury. We act for clients across England and Wales.
The Criminal Finances Act 2017
When the Criminal Finances Act was introduced in April 2017, it created two new criminal offences:
- Failure to prevent facilitation of UK tax evasion
- Failure to prevent facilitation of foreign tax evasion
Together, these offences are commonly known as ‘corporate criminal offences’ or ‘CCOs’.
The legislation puts a burden on ‘relevant bodies’ to control the actions of ‘associated persons’. In this context, a relevant body can be a company, a partnership, a non-profit organisation or other corporate body. An associated person can be anyone who performs services for, or on behalf of, the relevant body. This includes employees, contractors, suppliers, agents and other service providers.
This has significant implications for businesses, which must prevent anyone who works for them from facilitating tax evasion, be it in the UK or overseas. This must be achieved through the implementation of reasonable prevention procedures. If a business fails to take these steps – and an associated person facilitates tax evasion – then the business will be held accountable by default.
When will the charge be upheld?
If a business is to be found guilty of a CCO, three things must have happened:
- Tax evasion has taken place; and
- This tax evasion has been facilitated by a person associated with the business while performing services for the business; and
- The business failed to prevent an associated person from facilitating tax evasion
A business cannot be held criminally liable if one of its employees (or associated persons) was acting in a personal capacity. Furthermore, the associated person must have deliberately engaged in fraudulent activity. The charge cannot be applied where tax evasion was facilitated unknowingly, whether due to negligence or otherwise.
Reasonable prevention procedures
To comply with the legislation, businesses and other relevant bodies must enforce reasonable prevention procedures to reduce their exposure to tax evasion. HMRC guidelines set out six principles for businesses to follow:
1. Risk assessment
Businesses should carry out a risk assessment, analysing where incidents of tax evasion might occur. The findings should influence the remaining preventative procedures going forward.
2. Proportionality of risk-based preventative procedures
Measures should then be introduced to limit the business’ exposure to tax evasion. These should be proportionate to the risk. Very basic measures might not be considered reasonable if the risk is high, for example.
3. Top-level commitment
Everyone within the relevant body should be committed to eliminating the facilitation of tax evasion, extending all the way up to top-level management. It should be a priority for the most senior staff.
4. Due diligence
The business or relevant body should adhere to due diligence procedures, ensuring it remains compliant with the rules and regulations at all times.
Employees and other associated persons should be made aware of the prevention policies. This should be achieved through proper communication and training, if appropriate.
6. Monitoring and review
Prevention procedures may need to be adapted over time, whether due to organisational changes or concerns over effectiveness. The procedures should therefore be continually monitored and reviewed if required.
If a business or relevant body is accused of a CCO, it is necessary to show that reasonable prevention procedures were put in place, thereby absolving them of blame. Or it is necessary to establish that in the circumstances, it was not reasonable to expect that business to have preventative procedures.
If preventative procedures had been implemented, the first step is to draw attention to the risk assessment that was carried. This will provide an audit trail, providing evidence as to the actions a business or relevant body took and why. You will need the services of corporate fraud solicitors.
If there is any indication of the corporate failure to prevent the facilitation of tax evasion, a criminal investigation will be initiated by HMRC. If the tax evasion took place abroad, then the investigation will be conducted by the Serious Fraud Office or the National Crime Agency instead. Either way, if there is enough evidence to proceed with the case, then the Crown Prosecution Service will lay formal charges. The matter will then go to court.
Penalty for CCOs
Like corporate manslaughter, custodial sentences are not given for corporate criminal offences. After all, the relevant body cannot be sent to prison. However, a conviction can result in other penalties, such as an unlimited fine and ancillary court orders. This might include a confiscation order, which works to recover the proceeds of crime. Individuals may also face further charges for their involvement in the alleged fraud.
Fraud and financial crime solicitors London
If your business has been accused of failing to prevent the facilitation of tax evasion, contact us at Ashmans Solicitors. We have a specialist team of fraud and financial crime solicitors. These cases often hinge on a forensic analysis of the evidence. We can scrutinise the prosecution’s case, formulating an effective defence that disproves the allegations against you and your corporate entity.
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