In September 2017, the Criminal Finances Act 2017 came into force, introducing new measures to prevent tax evasion. Under these new rules, companies and partnerships can be found guilty of a criminal offence for failure to prevent the facilitation of tax evasion by ‘associated persons’ which includes their employees, workers, agents, contractors, and others providing services for the company (and presumably also covers a third party providing services on the company’s behalf). There are two new offences:
- The UK tax evasion offence; whereby a company, wherever it is located, facilitates evasion of UK tax.
- The overseas tax evasion offence; by which any company with a presence in the UK facilitates foreign tax evasion.
These are strict liability offences, so there is no need to show that the company was aware or intended for the tax evasion to take place. If a company is convicted, it can face an unlimited fine and have its assets confiscated.
It is a defence if a company can show that it put in place appropriate and reasonable measures to prevent the facilitation of tax evasion (or, indeed, that it was not reasonable to expect measures to be put in place in all the circumstances). It is therefore crucial for companies to carry out thorough risk assessments before turning to consider the measures to be adopted.
Why is all this relevant to your business? Because HMRC expects top-level commitment from all companies to tackle the above offences. Some suggested prevention measures include regular staff prevention training, implementing reporting procedures (and monitoring and enforcing compliance with these procedures), and introducing clauses into employment contracts that require employees not to facilitate tax evasion, and to immediately report any concerns. By updating your employment contracts with this new clause, this will mean that your employees are under a strict contractual duty not to facilitate tax evasion and a breach of that duty could result in them being fired. Another preventative measure could be to put in place a separate anti-facilitation of tax evasion policy, or include a specific section on the anti-facilitation of tax evasion in a general anti-corruption or ethics policy that you may already have.
If you have questions about amending your employment contracts to be compliant with the new law or about putting in place an anti-facilitation of tax evasion policy, do get in touch with our Employment team, who will be happy to help you.
The material contained in this guide is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.
© Miller Rosenfalck LLP, January 2018
Christina Leung, Associate