Are you failing to prevent tax evasion? Get ready for going digital

14 December 2017

The new Criminal Finances Act 2017 came into being on the 30th September 2017 and will make the NHS, corporate bodies and partnerships criminally liable if they fail to prevent tax evasion by a member of their staff or via any associated person.

Take note – this applies even where the NHS body was not involved in the act or was unaware of it. It spans all taxes including VAT, employee taxes and corporation tax. Fines are unlimited plus the reputational damage associated with any conviction would be of significant concern.

The offence of ‘failing to prevent’ attracts strict liability, so the NHS Trust itself need not be guilty of deliberate dishonesty, but only to have been ‘asleep at the wheel’ while someone associated with it knowingly helped another company or individual commit tax evasion.

What do you need to do?

Whilst this all sounds very serious, in most instances your organisation will not be starting from scratch. You should already have an existing due diligence programme in place designed to tackle risks in areas such as corruption and money laundering.

Trusts should ensure their existing governance, risk assessment and due diligence frameworks are updated to address the new requirements. In cases where you do not already have an existing and sufficiently robust risk management framework in place, such a framework will need to be developed.

Assessing risk

This will require the organisation to identify:

  • the potential risks of tax evasion being facilitated by an associated person;
  • the areas within the organisation which pose the greatest risks;
  • the extent to which existing procedures mitigate those risks; and
  • where the gaps are.

This involves a high-level understanding of the nature of the offence and what is needed for the reasonable prevention procedures defence to apply in the context of the business activity and its processes, including:

  • suitability and proportionality of risk-based prevention procedures;
  • top level commitment;
  • communication (including training);
  • monitoring and reviewing; and
  • seeking independent support.

There hasn’t been a lot of promotion on the introduction of these new rules, thus is likely that no action has yet been taken. However, these are important new regulations and process risks could be increased by the Government’s drive to digitise tax reporting.

Download the full report for the steps your organisation must make for making tax digital.

Beyond the balance sheet: helping you bring governance into focus