This is a new corporate criminal offence that comes into effect on 30 September 2017, which firms of accountants, tax advisers and all company directors need to be aware of. The underlying law is contained in the Criminal Finances Act 2017, which was hurriedly passed on 27 April before Parliament dissolved for the General Election.
The offences under this Act can apply to any company or partnership but not to individuals. It will make businesses vicariously liable if an employee or other “associated” person criminally facilitates tax evasion whilst acting in that capacity for the business, even if the senior management of the business was not involved or aware of what was going on. “Tax evasion” in this context is the fraudulent evasion of UK taxes or overseas taxes by a taxpayer (individual or legal entity) under existing law.
The consequences for breaching the Act include unlimited financial penalties, confiscation orders, serious crime prevention orders, regulatory issues and reputational damage.
The main line of defence is for the business to have reasonable procedures in place to prevent the facilitation of tax evasion, or that it was not reasonable in the circumstances to expect there to be a procedure in place. Our firm and our clients need to conduct risk assessments and put in place proportionate prevention controls and procedures.
The types of businesses most at risk, as well as accountants and legal advisers, are those which pay large sums to consultants, do cross-border business, engage casual or itinerant labour and contractors, or handle goods and services where organised fraud is a risk. All company boards should be discussing this issue to show the company has written policies in place to counter acts such as; falsifying dates on dividend documents, or claiming for non-deductible expenses.
The CIOT has produced some outline guidance, and the draft HMRC guidance will be revised shortly.
If you would like to discuss any of these issues further do not hesitate to contact DFC Accountants in Cardiff.