New corporate offence of failing to prevent facilitation of tax evasion

A new criminal corporate offence of failing to prevent facilitation of tax evasion comes into effect on 30 September 2017.

The offence covers organisations that fail to prevent instances when their associates, including employees, agents and service providers, facilitate tax evasion.

Organisations may be criminally liable if:

• their client committed tax fraud;
• one of their associates deliberately and dishonestly facilitated the fraud; and
• the organisation failed to prevent its associate from facilitating the fraud.

Organisations can defend themselves by putting in place reasonable preventative procedures such as risk assessments, due diligence assessments and fraud prevention policies and procedures.

The level of preventative procedures required also depends on the level of risk of the activity in question.

The Government has published guidance on the offence to assist organisations in putting reasonable prevention procedures in place.

The guidance notes that organisations in sectors such as financial services, tax advisory and legal sectors are likely to be at high risk of facilitating tax fraud. Partnerships as well as corporations can be liable under this offence.

However, the new offence does not apply to individuals, as individual liability for facilitating tax fraud already exists as a separate criminal offence.

A new parallel offence of failing to prevent facilitation of foreign tax evasion also comes into effect on 30 September 2017.

Qian Mou, employment law editor at XpertHR said: “The breadth of the new offences means organisations should put reasonable policies and procedures in place not only with respect to their employees, but for their agents and subcontractors as well.

“This may include preventative measures at overseas offices or for international services, if these are at risk of facilitating tax fraud.

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“Organisations should ensure that any new policies implemented are aligned with existing whistleblowing and other regulatory compliance requirements.”

relx_copyright – This article is Brightmine content – Copyright 2024 LexisNexis Risk Solutions