New legislation introduced in the Criminal Finances Act 2017 makes it a criminal offence for incorporated bodies and partnerships (relevant bodies) to fail to prevent the criminal facilitation of tax evasion.
Relevant bodies must put in place reasonable procedures to prevent associated persons from dishonestly and deliberately facilitating tax evasion. Associated persons include employees and others acting for or on behalf of the relevant body, including sub-contractors, suppliers, advisers to name but a few. A defence against prosecution is available, where an associated person has facilitated tax evasion, if the relevant body has reasonable prevention procedures in place, based on the six guiding principles discussed in further detail in a previous edition of Tax Voice.
The legislation took effect on 30 September 2017 and therefore relevant bodies should take action now if they have not already done so. Non-compliance may result in criminal investigation by HMRC, with any prosecutions being brought by the local public prosecution service (eg Crown Prosecution Service in England and Wales), Serious Fraud Office or National Crime Agency. Aside from the implications of a prosecution, or resulting regulatory action, the risk of negative publicity could adversely impact on the profitability of the business concerned.
We know that HMRC Customer Relationship Managers have started actively contacting relevant bodies to raise awareness of this legislation, and hence it appears that HMRC is keen to police the new rules. CRMs are clear in their correspondence that they cannot and will not ‘sign-off’ on whether or not procedures are reasonable, but have stated that they are open to discussing the requirements.
We are also aware that CRMs have reminded relevant bodies of how to self-report wrongdoing and have provided details of a link to the dedicated portal on HMRC’s website. They have also stated in their correspondence that, ‘timely self-reporting will be seen as an indicator of reasonable prevention procedures.’
For many businesses, this is not the first time they have been required to prepare and put in place procedures and documentation of a similar nature, and they may be able to build upon existing work undertaken. However, for some businesses, this is the first time that they have been required to put in place such frameworks, procedures and processes and therefore they need to consider where to start and how to implement appropriate measures now.
Relevant bodies should therefore consider what needs to be done to ensure compliance with this legislation and seek advice where necessary, as this could be a suggested agenda item for their next CRM meeting.
For more information please get in touch with Suze McDonald or your usual RSM contact.