The Serious Fraud Office (SFO) is to sift through tax records of companies under investigation for bribery as part of a broader plan to target criminals. The proposals mean that companies will have to hand over the relevant sections of their tax calculations so that the SFO can examine whether they have claimed tax deductions on bribes. If this is the case then HM Revenue & Customs may be informed of the sham accounts produced, resulting in the company being inspected by both the SFO and the tax office.
The move follows the huge revamp of UK anti-bribery laws (implemented in July) whereby the SFO may prosecute for offences including bribing another person, being bribed and bribing a foreign public official. The Crown Prosecution Service has recently made its first prosecution under the Bribery Act for a London court clerk allegedly accepting bribes see previous update: The Bribery Act: The Prosecutions Begin!
The Director of the Serious Fraud Office (SFO), Richard Alderman, believes that tax records could be the key to uncovering bribes and ensuring compliance with the bribery legislation. Alderman was the Director of Special Compliance at HMRC before moving on to his present position at the SFO and further changes resulting from his tax experience are anticipated. Bribes are non-deductible, therefore the SFO is demanding company records to see if there is anything which reveals or suggests that a figure was disallowed in the tax computation because it was a bribe. Alderman suspects that some companies may still be claiming tax deductions for foreign bribes which were permitted under English law until 2001.
Any company under investigation should be aware that there is a privilege against self-incrimination which could potentially overrule the SFO's investigatory powers. Officers of the company in question may also have to consider whether staff concerned in an inquiry should be advised to seek independent legal advice, as they too will benefit from the privilege against self-incrimination.
The legal profession has reacted to the new approach for uncovering bribery by approving of the procedure in theory; however there are some reservations over how it will work in practice, and the extent to which tax records will unveil further bribery offences remains to be seen.