The Criminal Finances Act 2017 (the “Act”) has just come into force in the UK. The Act introduces a new corporate offence of failing to prevent the criminal facilitation of criminal tax evasion. More information on the Act, and this new offence, can be found in this briefing.
The Act will have an impact on commercial transactions. This is in consequence of the broad definition of ‘Associated Persons’. This definition includes not just employees but third party contractors. Therefore, a company or partnership entering into a commercial agreement will have criminal liability if the counterparty is an agent or service provider (for example, a consultant, sub-contractor or provider of outsourced services) and the company/partnership fails to take reasonable steps to prevent them assisting another person to evade tax or evading tax themselves. The official sanction is an unlimited fine but corporates falling foul of the new offence are likely to experience knock-on regulatory, insurance and reputational issues. Companies and partnerships will, therefore, need to amend their contracts with third party contractors to include anti-evasion facilitation terms.