The Criminal Finances Act 2017 (Commencement No. 1) Regulations 2017 were introduced on 13 July 2017 and will bring into effect the two new corporate criminal offences of "failure to prevent" the facilitation of UK and foreign tax evasion, included in Part 3 of the Criminal Finances Act 2017 ("the Act"), from 30 September 2017.
The Act creates two new criminal offences for corporates which fail to prevent the facilitation of tax evasion, either in the UK (section 45) or abroad (section 46), by a person associated with the corporate. The foreign tax evasion offence requires dual criminality, in that the tax evasion offence in the foreign jurisdiction must also be an offence under English law. The corporate will have a defence to both offences if it has ‘reasonable procedures’ in place to prevent the offence. For more information about the two offences please see our June bulletin here and our December 2016 briefing here.
The regulations also bring into force from 17 July 2017 the requirement in section 47 of the Act for the government to publish guidance regarding the 'reasonable procedures' which a corporate can put in place as a defence against the new offences. The draft guidance published in October 2016 (available here) explains that HMRC will take into consideration the prevention procedures that were in place and planned at the time that the facilitation of tax evasion was committed, recognising that some procedures, such as training programmes and IT systems, will take time to roll out. That said, the government expects there to be "rapid implementation" of reasonable prevention procedures by corporates, focussing on the major risks and priorities, with a clear timeframe and implementation plan by the time the offences are in force. We await publication of the final guidance.
We recommend that all UK corporates and all non UK corporates with UK clients or that carry on any business in the UK, or engage associated persons in the UK, should, by the 30 September, have at least prepared and documented a plan for their organisation's response to the new offences and embarked on conducting their risk assessment.