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Failing to prevent facilitation of tax evasion

Source: HM Revenue & Customs | | 04/09/2017

A new corporate offence of failing to prevent the facilitation of tax evasion will come into force on 30 September 2017 under the Criminal Finances Act 2017.

Under the legislation, a relevant body, (B), which can be either a company or a partnership (including limited liability partnerships), is guilty of an offence if a person commits a UK tax evasion facilitation offence when acting in the capacity of a person associated with B. Individuals can’t be charged with the corporate offence. A person can be associated with B if they’re an employee acting in that capacity, an agent acting in that capacity or any other person who performs services for and on behalf of B, e.g. a contractor. The corporate offence is punishable by an unlimited fine.

What this means in practice is that if one of your customers is guilty of criminal tax evasion and a person associated with your business, such as one of your employees, acts dishonestly to aid in that tax evasion, you can be guilty of the corporate offence.

However, it’s a defence for B to prove that, when the UK tax evasion facilitation offence was committed, it had reasonable prevention procedures in place, i.e. procedures designed to prevent associated persons from committing UK tax evasion facilitation offences. If, therefore, you can show that your business has put in place a system of reasonable prevention procedures that identify and mitigate your tax evasion facilitation risks, you should have a defence to the criminal offence. What reasonable procedures you need to put in place will be proportionate to your level of risk, and this is likely to be lower for small businesses. The government has published guidance which provides useful information on identifying and assessing the risks and putting reasonable procedures in place to tackle them.

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