The Criminal Finances Act 2017, which comes into effect on 30 September, introduces a new offence where a company can be held responsible if anyone acting on its behalf facilitates tax evasion in any way.
“It has a global scope,” said Richard Grint, financial services expert at PA Consulting Group. “This represents a steep change from the range of previous tax evasion offences and is a significant additional burden for firms.”
UK tax offences will be investigated by HM Revenue & Customs, while international investigations will be conducted by the Serious Fraud Office (SFO) or National Crime Agency (NCA).
Potential fines are unlimited.
For a firm to be liable, there must be:
- Criminal tax evasion by a taxpayer (either an individual or a firm).
- Criminal facilitation of the offence by a representative of the firm.
- Failure by the firm to prevent its representative from committing the criminal act.
The Act removes the need to prove there was a “directing mind” at the top of the organisation, with knowledge of, or responsibility for, the tax evasion.
The only acceptable defence is that the company had reasonable preventative measures in place to prevent the facilitation of tax evasion or it was unreasonable to expect such procedures to be in place.
Another feature of the Act is that it allows the NCA, Crown Prosecution Service, Financial Conduct Authority, SFO and HMRC to apply for unexplained wealth orders (UWO).
The UWOs mean that an individual or company must explain the origin of assets that appear to be disproportionate to their known income.
Also, if they are suspected of involvement in, or association with, serious criminality or are politically exposed persons.