The new regime of failing to prevent the facilitation of tax evasion came into force on 30 September 2017, pursuant to Part 3 of the Criminal Finances Act 2017 (the "Act"). The Act has created two offences; failure to prevent facilitation of UK tax evasion (the "UK Offence"), and failure to prevent facilitation of foreign tax evasion (the "Foreign Offence"). The offences apply to companies and partnerships, and apply when the following requirements are satisfied:
- Stage One – criminal tax evasion by a taxpayer (either by an individual or an entity);
- Stage Two – criminal facilitation of the tax evasion by an "associated person" of the relevant body acting in that capacity; and
- Stage Three – the relevant body failing to prevent the associated person from committing the criminal facilitation act.
The UK Offence applies to all businesses, regardless of where they are located. The Foreign Offence applies to a relevant body (i) incorporated under UK law; (ii) carrying on a business or part of a business in the UK; or (iii) any aspect of the foreign tax evasion facilitation offence takes place in the UK. An associated person could be an employee, agent or other person who performs services for or on behalf of the relevant body (which could be an individual or an incorporated entity).
It is a defence for the relevant body to have in place reasonable prevention measures to prevent the UK Offence and/or the Foreign Offence by an associated person. HMRC's guidance on assessing reasonable prevention measures are informed by six principles which are not prescriptive and are intended to be flexible and outcome focussed:
- Risk assessment
- Proportionality of risk based prevention procedures
- Top level commitment
- Due diligence
- Communication (including training)
- Monitoring and review
The penalties for these offences include an unlimited fine and ancillary orders such as confiscation orders.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.