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Failure to prevent the facilitation of tax evasion: two new criminal offences

Posted on 4 October 2017

Tribunal breaks new ground in Carrimjee case

Two new highly publicised offences of the failure to prevent the facilitation of tax evasion came into force on 30 September 2017. Tax evasion has always been a crime, however these new offences broaden the scope of persons who may be prosecuted, now holding organisations criminally accountable for the actions of their employees and other associated persons. 

A company or partnership is strictly liable for the new crime of "failing to prevent the facilitation of tax evasion" if a taxpayer criminally evades tax; an "associated person" of a company or partnership (for example, an employee, agent or any person performing services on their behalf) facilitates the taxpayer's evasion; and the facilitating company/partnership has not introduced "reasonable prevention procedures" (unless it was not reasonable to expect it to do so).

The two offences are set out in Part 3 of Criminal Finances Act 2017 and cover:

  1. facilitation of UK tax evasion, which can be committed by any facilitator wherever formed or operated if the underlying taxpayer's tax evasion is either:
    • the UK common law offence of cheating the public revenue; or
    • a statutory UK offence consisting of being knowingly concerned in, or taking steps with a view to, fraudulent tax evasion; and
  2. facilitation of non-UK tax evasion, which is only committed if the facilitator is a UK company/partnership; carries on business in the UK; or conducts the facilitation in the UK, and if the offence by the taxpayer:
    • amounts to an offence in the taxpayer's local jurisdiction; and
    • would be considered fraudulent tax evasion by a UK court if committed in the UK.

Both the taxpayer and the facilitator must be proved beyond all reasonable doubt to have "deliberately and dishonestly" committed tax evasion or the facilitation of that tax evasion (respectively). HMRC published guidance on the new offences and confirmed that a conviction at the taxpayer level is not a pre-requisite. It is then for the company/partnership to prove that it introduced reasonable prevention procedures (or that it was not reasonable to expect it to do so).  The knowledge and intention of the company/partnership is not relevant, as the offence is one of strict liability.

The penalty is an unlimited fine and possibly ancillary orders, such as confiscation orders. In addition to the financial consequences, a conviction is likely to have a damaging impact on an organisation's reputation.

The new measures were first announced in spring 2015 and many organisations have been busy undertaking risk assessments and due diligence, providing training to staff and introducing procedures to ensure that they have "reasonable prevention procedures" in place.

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