HMRC is reported to be investigating alleged violations of a new criminal offence, part of the crackdown on money laundering, for the first time.
A freedom of information request made by a law firm revealed there are five current criminal investigations.
The Criminal Finances Act 2017 introduced the new offence of failing to prevent the facilitation of UK tax evasion. The aim of the government was for relevant bodies to be held criminally liable where they fail to prevent those who act for, or on their behalf, from criminally facilitating tax evasion.
What is the actual offence?
The offence is committed where a relevant body fails to prevent an associated person criminally facilitating the evasion of a tax.
Previously in order to attribute criminal liability to a relevant body, you would have to show that senior members of that body were aware and involved, which was much harder.
Tax evasion is defined as an offence amounting to a cheat of the public revenue or any offence consisting of being knowingly concerned in or taking steps with a view to the fraudulent evasion of tax. The offence is only committed where a UK tax evasion offence has been committed if a tax-payer is non-compliant or engaged in avoidance falling short of evasion the offence is not committed.
Facilitation of tax evasion compromises being knowingly concerned in, or taking steps with a view to, the tax evasion of another, as well as aiding and abetting another person’s offence of tax evasion. It is not a criminal offence if an associated person inadvertently or negligently facilitates another’s tax evasion. The facilitation has to be criminal.
The associated person has to commit the offence in the capacity of a person associated with the relevant body. So, if an employee criminally facilitates tax evasion in the course of their private life, they commit an offence but not this one.
Where a tax evasion offence has been committed, and a person acting in the capacity of a person associated with the relevant body has committed a tax evasion facilitation offence, the relevant body will be guilty of the offence.
It is a defence for the relevant body to have in place reasonable prevention procedures, those designed to prevent persons associated with it from committing facilitation offences. This could include regular staff training, contractual terms, compliance monitoring and clear reporting procedures. It is also a defence if it is not reasonable to expect the relevant body to have such procedures.
What is the penalty?
The offence is punishable by way of an unlimited fine and can be dealt with in the Magistrates Court or the Crown Court. There will of course be significant reputational damage to the company and those in charge.
In their 2018 business plan, HMRC set out their target of 100 investigations per year.
The fact that there are only five currently outstanding may be a surprise in the context of their stated intention or may mean that more investigations are imminent.
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