The main provisions of the Criminal Finances Act 2017 come into force on 30th September 2017, and
there are important things for a business to know.
New Provisions
While tax evasion is already an offence, currently there is no obligation on a company to take steps
to stop another person engaging in such illegal activity. With a few exceptions, if you do not
personally participate, you can stand idly by while another person offends. These provisions bring
this situation to an end so far as certain aspects of taxation are concerned.
How?
The Act will render a business (which includes partnerships) liable to prosecution if a 'tax offence' is
committed by an employee or other person performing services for the company (agents etc.).
To be guilty, the following must apply:
There has been a criminal evasion of tax (whether that resulted in prosecution or not).
An 'Associated Person' facilitated the commission of that offence (i.e. a person linked to
your business).
A failure by the firm to prevent that facilitation taking place; This is a strict liability element;
the business need not know that anything unlawful was taking place.
'Associated Person' means: '...an employee, a person acting in the capacity of an agent, or any other
person who performs services for or on behalf of your company who is acting in the capacity of a
person performing such services'.
The provisions apply in relation to both UK and foreign offences.
Is There A Defence?
Yes, if you can prove:
(a) That you had in place such prevention procedures as it was reasonable in all the circumstances to
expect you to have in place, or
(b) It was not reasonable in all the circumstances to expect you to have any prevention procedures
in place.
Therefore, your business needs to have reasonable safeguards in place to be able to try and prevent
tax evasion.
What Is The Penalty?
Your company could face an unlimited fine. While there are currently no sentencing guidelines, we
can reasonably anticipate these to be very large, in some cases measured in the tens of thousands of
pounds and above. You would also need to try and measure the reputational and other damage
(such as loss of future contracts) that might follow.
That Doesn't Sound Good, What Can I Do To Protect My Company?
Your business will need to commit to policies and processes designed to prevent your employees
and others committing tax facilitation offences. There is no 'one size fits all' policy toolkit that you
can purchase off the shelf. To devise such procedures, you will need to:
Carry out a risk assessment.
Decide on what is a proportionate response to that risk.
Ensure top-level commitment within the organisation to implementing any
policy/procedure.
Maintain due diligence.
Communicate the policy/procedures and train all employees/agents who carry out work on
your behalf.
Monitor and review the policies and procedures to ensure continued effectiveness.
We Will Certainly Put This On Our ‘To Do’ List
While HMRC doesn't expect you to have everything in place on 30th September 2017, it does have
some 'day one' requirements, with HMRC stating in its guidance that:
'[We expect] there to be rapid implementation, focusing on the major risks and priorities, with a clear
timeframe and implementation plan on entry into force’.'
Help!
Laws relating to business can be challenging at the best of times, but when they could also land your
company before the courts and facing crippling fines, it is best to act in advance and do all you
reasonably can to put protections in place.
The provisions of the Criminal Finances Act 2017 are only summarised above; it will hardly surprise
you to know that they are in fact much more complex, so you should take care to understand in
detail your actual obligations.