Under the new legislation, firms anywhere in the world could find themselves held criminally responsible for members of staff who are involved in, or fail to prevent, tax evasion.
The UK Criminal Finances Act (CFA) 2017 contains a new corporate offence of ‘failure to prevent the facilitation of tax evasion’ and businesses anywhere in the world could be prosecuted under the legislation.
Law firm Carey Olson said in an update on the legislation: “Given the extra-territorial ramifications of the CFA, Channel Islands businesses, especially those in the financial services and accountancy sectors, including branch offices, promoters and managers of investment products, wealth managers, fiduciaries and trustees, will in particular need to be astute to its challenges and effects”.
These businesses should also “take what HMRC has called a ‘risk-based and proportionate’ approach to implementation of preventative procedures”, it said.
The law firm said that while the two offences covered by the legislation – ‘failure to prevent the facilitation of UK tax evasion offences’ and ‘failure to prevent the facilitation of foreign tax evasion offences under certain circumstances’ – were not new.
“What is, is that incorporated bodies, i.e. businesses and organisations, can be held criminally liable for offences committed by their employees, agents and associated persons, even if the senior management were uninvolved or unaware of the illegal activity.”
Sanctions
Carey Olson said in its report on the new legislation that the consequences could be severe for firms found guilty under the new laws.
“The sanctions for commission of the offences of failure to prevent the facilitation of UK tax evasion or failure to prevent facilitation of foreign tax evasion include unlimited financial penalties, as well as ancillary orders under the CFA such as confiscation orders.
“Equally damaging will be the regulatory sanctions and reputational damage that may follow, with the potential for loss of licences and withdrawal of regulatory consents.”
Carey Olson’s update concluded: “HMRC has at its disposal a new weapon in its armoury against tax evasion, one which through its strict liability and extraterritorial approach attempts to circumvent the difficulties it has previously experienced in seeking to collect revenue and impose liability on organisations.”
