On 17 April 2016, HMRC published a consultation document titled Tackling tax evasion: a new corporate offence of failure to prevent the criminal facilitation of tax evasion. This follows an earlier consultation in July 2015 and the response document of December 2015 which contained a first draft of the legislation. In this latest consultation HMRC is seeking feedback on the wording of the new corporate criminal offence and how this policy is best expressed in statute and guidance.
The new consultation document contains updated draft legislation and draft guidance.
To be operative the offence requires two prior criminal acts:
- By a taxpayer (either a legal or natural person) under existing criminal law (e.g. cheat or fraudulently evading the liability to pay VAT).
- By a person associated with the corporation, knowingly concerned in; or aiding, abetting, counselling, or procuring the tax evasion by the taxpayer.
In these circumstances a failure to take reasonable steps to prevent those who acted on its behalf from committing the criminal act could render the business liable under either of the offences.
There have been a number of changes to the draft legislation since the version published in December. Some of the more notable changes are:
- The offence, as currently envisaged, is in fact two offences. One pertaining to evasion of UK taxes and one for foreign taxes.
- The offence of failing to prevent facilitation of foreign tax offences is limited to foreign tax offences that would also be an offence if committed in the UK. The splitting of these offences allows for greater certainty around what constitutes a ‘foreign tax evasion offence’ and is more limited in scope from the original draft.
- Likewise there are now two defences. The business had in place such prevention procedures as it was reasonable in all the circumstances to expect it to have, or that in all the circumstances, it was not reasonable to expect it to have any prevention procedures in place.
- The definition of ‘tax evasion facilitation offence’ has been tightened and no longer includes circumstances where the associated person was merely "encouraging or assisting the commission of the offence".
- The circumstances in which a business could be prosecuted for failing to prevent the facilitation of foreign tax evasion offences has been expanded. Previously this was limited to businesses incorporated in the UK or who were doing business in the UK. This has now been broadened to include liability where "any act or omission constituting part of the foreign tax evasion facilitation offence takes place in the UK".
The draft Guidance focuses on the (now familiar) Principles:
- Proportionality of reasonable procedures
- Top level commitment
- Risk Assessment
- Due Diligence
- Communication (including training)
- Monitoring and Review
It also contains some additional commentary regarding the key concepts:
- Relevant body;
- Associated Person;
- UK Tax evasion offence;
- UK Tax evasion facilitation offence; and
- Foreign Tax evasion offence
Comments have been requested on the updated draft legislation and draft guidance by 10 July 2016.