Preventing tax evasion penalties

The Corporate Criminal Offence was introduced by HM Revenue and Customs in the Criminal Finance Act 2017, having effect from 30 September 2017. 

The legislation is designed to hold relevant entities to account where they fail to adopt appropriate procedures to prevent the facilitation of tax evasion. 

It applies to all relevant entities, both companies and partnerships, regardless of their size. Under the legislation, there were two offences introduced, a domestic offence and a foreign offence. The scope of this legislation encompasses any tax and any jurisdiction with a similar tax offence for tax evasion.

For an offence to occur three stages must have taken place;

Stage 1 – Evasion of tax by a taxpayer.

Stage 2 – The facilitation of tax by an employee or associated person of the relevant body.

Stage 3 – The relevant body has failed to put appropriate policies and procedures in place to help prevent the facilitation of tax evasion. 

The CCO was introduced in 2017, enabling HMRC to seek the conviction of the relevant body, be that a company or partnership, as a legal entity. The penalties for falling foul of the legislation include unlimited fines, a requirement to disclose the offence to a professional regulator and a public record of the conviction.

It is therefore important for relevant bodies to put in place preventative measures. Policies, risk-assessments, due diligence and the training of staff on the legislation are all principles mentioned in HMRC’s guidance.

It is important that all relevant bodies review their responsibilities under this legislation to ensure that they have a defence in place.

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