Many businesses are still at risk from tax corporate criminal offence

"Many businesses are not taking the issue seriously enough. This is a risky strategy as one rogue individual could expose the business to serious adverse publicity and a criminal conviction could prevent a business from bidding for government contracts," Catherine Robins said.

Two new offences were introduced by the Criminal Finances Act 2017 and began to apply from 30 September 2017.  The first offence applies to all businesses, wherever located, in respect of the facilitation of UK tax evasion. The second offence applies to businesses with a UK connection in respect of the facilitation of non-UK tax evasion.

The offences apply to both companies and partnerships. They effectively make a business vicariously liable for the criminal acts of its employees and other persons 'associated' with it, even if the senior management of the business was not involved or aware of what was going on.

There are two stages for the new corporate offences to apply: there must have been criminal tax evasion by someone other than the business concerned; and a person/entity who is associated with the business must have criminally facilitated the tax evasion whilst performing services for that business.

'Associated persons' are employees, agents and other persons who perform services for or on behalf of the business, such as contractors, suppliers, agents and intermediaries.

Businesses will have a defence if they can prove that they had reasonable prevention procedures in place to prevent the facilitation of tax evasion, or that it was not reasonable in the circumstances to expect there to be procedures in place.

"Some risk teams conducted an initial assessment to identify risk areas for their business before the legislation came into force, but have since lost steam and have not followed through by actually putting policies and procedures in place," Catherine Robins said.

"We are now over four months on since the introduction of the new rules. Although, HMRC did not expect businesses to have everything in place from day one, the longer the offence has been in force, the more difficult it will be to rely on the reasonable prevention procedures defence if you have not revised your procedures and trained your staff," she said.

"No matter how comprehensive your risk assessment was, you are still exposed if you have not actually made any practical changes to your procedures," said Catherine Robins.

Training programs and company policies and procedures should be put in place to manage the risk of employees facilitating tax evasion. However, businesses are also at risk from the actions of associated persons who are not employees, where it may be more difficult to manage the risk, she said.

Businesses will need to place obligations on third parties not to commit or facilitate a tax evasion offence. Wording should be considered for inclusion in contracts with agents, intermediaries, sub-contractors and suppliers, Catherine Robins said.

Employment status amongst contractors can also be a potential risk area for the new offence, she said.