What is it?

The Criminal Finances Act 2017 (the ‘Act’) has created two new corporate offences (the ‘Offences’):

  • Failure to prevent the facilitation of tax evasion; and
  • Failure to prevent the facilitation of foreign tax evasion.

The Act affects all corporate bodies and partnerships (Relevant Bodies), irrespective of where in the world they are incorporated or formed.

How does it work?

The Act makes Relevant Bodies criminally liable, where it can be shown that:

  • A tax payer has committed a tax evasion offence; and
  • An employee, agent or any other person performing services for or on behalf of the Relevant Body commits a tax evasion “Facilitation Offence” whilst acting in the capacity of a person performing such services.

There is no need to prove that the Relevant Body was aware of the criminal conduct. The question of whether or not a person is performing services for or on behalf of the Relevant Body is a question of fact not law, and can be inferred from circumstances other than the contractual documentation in place. Essentially, if it can be shown that, whilst committing the Facilitation Offence, the individual (or company) committing the Facilitation Offence was performing a service for or on behalf of the Relevant Body, then the Relevant Body could be prosecuted.

Where does it apply?

The Act applies everywhere, provided either the Relevant Body or the Facilitation Offence has a connection to the UK. This means that either of the following circumstances must apply:

  • The company is incorporated in, or carries on business or part of its business in the UK; or
  • Any conduct constituting part of the Facilitation Offence was committed in the UK.

The Offences come into force from 30 September 2017.

How can I protect myself?

It will be a defence to show that, at the time that the Facilitation Offence was committed:

  • the Relevant Body had in place such prevention procedures as it was reasonable in all the circumstances to expect the Relevant Body to have in place, OR
  • that it was not reasonable in all the circumstances to expect the Relevant Body to have any prevention procedures in place.

The Government has published Guidance stating that it is expecting all Relevant Bodies to now engage in the “rapid implementation“ of prevention procedures, following the coming into force of the Offences on 30 September.