There are only five on going investigations by HMRC under the ‘failure to prevent the facilitation of UK tax evasion’ corporate criminal offence introduced by the Criminal Finances Act 2017, according to a House of Commons question and answer earlier this month. There was no mention of any investigations relating to the equivalent facilitation of foreign tax evasion offence.
This low level of investigations may or may not have prompted the publication, last week, of new HMRC guidance on how to self-report, via an online form. Interestingly, anyone with a Government Gateway ID (i.e. most members of the public) is able to access the form. Although the guidance indicates that only those with authority to report on an organisation’s behalf may use the form, there appears to be no safeguard in place to ensure that the individual completing the form does in fact have the relevant ‘authority’. There would therefore appear to be nothing to prevent a whistle-blower submitting a report, before reporting any concerns internally.
The guidance specifically states that the form should only be used to report an organisation’s failure to prevent the criminal facilitation of tax evasion: “This does not include the accidental, ignorant or negligent facilitation of tax evasion”. The guidance warns the reporter that they may commit a criminal offence if they provide false information or include information that they do not honestly believe to be true. It is however likely to be tricky for a reporter to reliably establish the intent of the facilitator in many cases so it is doubtful that a reporter would be criticised for submitting a report unless it was relatively clear there was no criminal intent.
When and whether to self report?
Unlike with the SARs regime, where those in the regulated sector have obligations to report suspicions of money laundering or terrorist financing, the reporting regime for the facilitation offences is entirely voluntary, which is underlined by HMRC’s statement that both the reporter and the organisation have the right to remain silent.
So what are the benefits of self reporting? The failure to prevent the facilitation of UK and foreign tax evasion offences are strict liability offences for the corporate, subject only to a ‘reasonable prevention procedures’ defence. HMRC’s new guidance notes that the fact a self-report has been made may well help an organisation show that such reasonable prevention procedures were in place. Not surprisingly, the guidance also notes that self-reporting will be relevant to whether a Deferred Prosecution Agreement will be offered and/or what penalty should be imposed on the organisation.
Some organisations may face less of a choice about whether to self report. An organisation in the regulated sector that is under an obligation to file a SAR as it suspects money laundering in connection with a facilitation offence may, in many cases, decide to self report on the basis that the NCA would probably inform HMRC and/or the SFO in any event.
In terms of timing, the guidance stipulates that if an organisation’s obligation to submit a SAR is triggered, the SAR must be submitted before the facilitation offence is self-reported. Any SARs or other reports made must also be referred to in the self-report, assisting with cooperation across the organisations. As HMRC only investigates the UK offence, the guidance clearly indicates that any reports regarding the foreign tax evasion offence must be made to the SFO.
The guidance itself is incredibly short and goes no further than providing some direction as to the types of information which should be provided (e.g. who in the organisation facilitated the evasion, the capacity they were acting in, how they facilitated the evasion, what tax was evaded, how the evasion was discovered, an overview of the organisation’s prevention procedures). As noted, there also appears to be no control over who can submit a report, and there is also no information on next steps, for example, when or if HMRC will be back in contact with the reporter or the organisation.