On 30 September 2017 the Criminal Finance Act 2017 came into force and introduced the new criminal offences of failing to prevent the facilitation of tax evasion. Up until now it has not been possible to hold a corporate body liable for tax evasion. This new Act makes companies and partnerships criminally liable if they fail to prevent the facilitation of tax evasion ‐ both in the UK and offshore ‐ by an associated person, even in circumstances where the corporate body was not involved in, or aware of, the criminal conduct.
The new offences are modelled on the "failure to prevent" bribery offence contained in the Bribery Act 2010. Similar to the bribery offences, they impose strict liability and therefore require no proof of involvement by the 'directing mind' of the company, thus overcoming the difficulties previously faced when bringing businesses to account for corporate offences.
A complete statutory defence is, however, available where the corporate can show that they implemented reasonable preventative procedures, or where it would have been unreasonable or unrealistic, in the circumstances, to have expected such procedures to be implemented.
Penalties for committing these offences include an unlimited financial penalty and/or ancillary orders including confiscation orders or serious crime prevention orders. Conviction for the offences may also prevent the company from being eligible to receive public contracts as well as wider damages reputational damage.
The Act essentially makes owners and managers responsible for preventing their staff and agents from committing tax evasion. The larger and more dynamic the business, the greater the risk that such activity might have occurred. Accountants' firms are squarely in the sights of the legislation so firms should be reviewing processes and procedures to ensure that that appropriate prevention and detection measures are in place.