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Risk of annual HMRC enquiry where the Corporate Criminal Offence is not addressed

Risk of annual HMRC enquiry where the Corporate Criminal Offence is not addressed

Posted on 15 November 2019

There have been recent changes in HMRC's risk assessment process that mean that companies or partnerships that fail to properly address the "corporate criminal offences" requirements may face annual enquiries into their tax affairs.

The corporate criminal offences came into effect in 2017, as discussed in an earlier edition of Tax Aware. Broadly, the offence is the failure to prevent the facilitation of tax evasion. If in breach, the company risks prosecution.  

Companies and partnerships can mitigate the risk by introducing "reasonable prevention procedures", which provides a statutory defence.  It appears that many companies and partnerships are yet to introduce such procedures.

Recent changes in HMRC's Tax Compliance Risk Management Guidance seek to address this issue. Going forward, if HMRC discovers that a company has failed to introduce reasonable prevention procedures it will regard the company as "high risk", which will in turn mean that the company's annual accounts and tax returns will be scrutinised in detail on an annual basis.  In contrast, low risk companies could expect a lighter review every few years. 

Putting such procedures in place is therefore now even more imperative for companies and partnerships that wish to avoid ongoing and costly tax enquiries.

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