HMRC announces nine live corporate criminal offence investigations

In a recent Freedom of Information (FOI) release, HMRC announced that it has nine live corporate criminal offence investigations, with a further 26 live opportunities currently under review. 

The investigations span 11 different business sectors, including software providers, labour provision, accountancy and legal services and transport. No charging decisions have yet been made.

The Criminal Finances Act 2017

The corporate criminal offence of failure to prevent the facilitation of tax evasion is under Part 3 of the Criminal Finances Act 2017 (the Act). It is a criminal offence for organisations to fail to put in place reasonable procedures to prevent associated persons from facilitating tax evasion.

Section 44(4) of the act sets out the definition of ‘associated person’. The definition is purposefully wide and can be found here. If services are carried out by the person or entity ‘for or on behalf of’ the organisation, the relationship of ‘associated person’ will arise. HMRC guidance specifies that the associated person ‘must commit the facilitation of tax evasion offence in the capacity of an associated person’.

The offence is that of strict liability and therefore no knowledge or intention is required on the part of the organisation to commit the offence. Organisations convicted of the offence are at risk of unlimited fines and the possible confiscation of their assets. Also, with any investigation and prosecution there is the risk of reputational damage and further consequences for the organisation if it is regulated.   

Reasonable procedures

The FOI release is a reminder to all organisations to take their obligations under the Act seriously and put in place reasonable procedures to prevent the facilitation of tax evasion. If an organisation is prosecuted, the reasonableness of their prevention procedures will be a matter for the court to decide.

Examples of procedures could include:

1. Carrying out a detailed risk assessment.
2. Distributing an internal high-level statement (tone from the top) committing to preventing the facilitation of tax evasion.
3. Publishing a statement publicly committing to preventing the facilitation of tax evasion.
4. Training staff and recording outcomes.
5. Carrying out an assessment of controls ensuring policies and procedures are appropriate and are continually developed.
6. Consider a review of appropriate policies to explicitly refer to the prevention of tax evasion and make sure staff are aware of how to report their suspicions.

HMRC have produced guidance for organisations on how to tackle tax evasion which can be found here.

Conclusion

Shoosmiths have a dedicated Business Crime and Compliance team who regularly undertake work in relation to investigations and prosecutions by HMRC. The team can also undertake risk assessments of specific areas of your organisation and review existing policies and procedures and create bespoke new ones. You can find out more about how the team can help here.