Financial services firms should ensure they have in place appropriate policies and procedures as they prepare for the new corporate tax evasion offences.

Regulations have been made that will bring into force the new corporate offences on 30 September 2017. The regulations also mean that the Chancellor of the Exchequer is now required to publish guidance for firms about procedures to prevent the commission of these offences.

In their recent briefing our tax colleagues have explained the new corporate tax evasion offences. The Criminal Finances Act (Commencement No. 1) Regulations 2017 (SI 2017/739) bring most of Part 3 of the Criminal Finances Act 2017 (CFA) into force on 30 September 2017, including both of the corporate offences of failure to prevent the facilitation of tax evasion.

These two new strict liability offences for corporates (including partnerships) of failing to prevent the facilitation of tax evasion, both in the UK and overseas, mirror the offence created by section 7 of the Bribery Act 2010. Indeed, like the Bribery Act, the CFA has wide jurisdictional reach, covering UK based companies and foreign companies with a UK office, and criminalises the conduct of individuals anywhere in the world. These offences will result in a company being held criminally liable for the actions of its staff, agents or other persons associated with it, unless it can demonstrate it had reasonable "prevention procedures" in place to prevent the facilitation of tax offences.

As a precursor to the coming into force of the offences, the regulations also brought section 47 of the CFA into force on 17 July 2017. Companies will need to ensure they have prevention procedures in place in advance of the offences under the CFA coming into force and section 47 concerns the publication of guidance about the prevention procedures. Section 47 specifically requires the Chancellor to publish guidance about the prevention procedures that relevant corporates should look to have in place (the guidance is likely to be published by HMRC on behalf of the Chancellor). Under this section, the Chancellor may also endorse guidance prepared and published by others, meaning that overarching guidance can be supported by consistent guidance more closely tailored to a particular sector.

Draft guidance has previously been published by HMRC and it is likely that the finalised guidance will resemble this in many regards. The draft guidance is designed to be of general application and is formulated around the six guiding principles (which mirror the principles in the guidance relevant to the Bribery Act):

  • Risk assessment.
  • Proportionality of risk-based prevention procedures.
  • Top level commitment.
  • Due diligence.
  • Communication (including training).
  • Monitoring and review.

Whilst the six principles are identical to those required to defend a charge under section 7 of the Bribery Act 2010, it will not be enough for firms to rely on existing policies and procedures. Instead, companies must thoroughly assess the risks they will face and implement new policies and procedures or at least tailor what is already there.

Mindful of the limited time available until the coming into force of the new offences, firms should commence reviewing their prevention procedures in the light of the draft guidance. If the finalised guidance, when it is published, differs in any material way firms can then revise the relevant specific aspects of their policies and procedures accordingly.