Facilitating evasion offence brought forward

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Robert Lovell
Managing Editor
AccountingWEB.co.uk
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The government will pass new legislation this year under which companies and partnerships will commit a criminal offence if their employees or associates ‘facilitate’ tax evasion.

The open consultation, called ‘Tackling tax evasion: a new corporate offence of failure to prevent the criminal facilitation of tax evasion’, has been brought forward following the Panama Papers leak earlier this month.

The new offence will apply to businesses based outside of the UK as well as those in the UK if UK tax is evaded.

Businesses would also commit an offence in respect of the facilitation of non-UK tax evasion if it involves a UK entity or branch or if any part of the facilitation takes place in the UK.

According to the consultation it will be a defence in all cases to show that ‘reasonable procedures’ were in place to try to prevent facilitation.

Pinsent Masons said in an update that although the obvious targets are banks, fiduciaries and professional services firms, the new legislation is likely to increase compliance requirements and costs across all business sectors.

Jason Collins, partner and head of tax at the law firm, said “…all companies and partnerships will need to put training, policies and procedures in place in order to avoid liability.”

The draft guidance sets out six principles which businesses should take into account in formulating procedures to prevent themselves from falling foul of the new offence, including:

  • Proportionality of reasonable procedures
  • Top level commitment
  • Risk assessment
  • Due diligence
  • Communication (including training)
  • Monitoring and review

The government is keen to get feedback from businesses and trade bodies, and is consulting on the draft legislation and guidance until 10 July.

Replies

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27th Apr 2016 09:04

Now, correct me if I am wrong

but I always thought that tax evasion is a criminal offence. My thinking is that it follows that anyone involved would be committing that offence. So what's new Robert?

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27th Apr 2016 09:38

I may be wrong

I thought the new legislation stopped companies from blaming their employees, as many companies have claimed they were 'totally unaware' of the tax evasion being promoted within their companies.

It will cost companies more, but that always happens. Some people 'bend the rules', and everyone else has to pay the price through increased legislation which is introduced to try to put a stop to it.

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27th Apr 2016 10:14

If a company

was unaware and can prove that, then surely the new laws are useless.

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27th Apr 2016 10:22

Not quite

The new legislation makes the top level management of the company responsible for "being aware" by ensuring that sufficient checks and safeguards are in place to prevent the facilitation of the offence in the first place.

Under existing legislation, companies with decentralised mananagement in particular were able to escape prosecution because top level rarely had an eye on the nitty gritty at the middle. This will no longer be possible.

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27th Apr 2016 10:33

I can't see

assumptions working in the courts. How will the court of human rights view this?

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to johnjenkins
08th May 2016 11:52

By saying its proportionate to the mischief to be cured-their stock in trade answer I'm afraid!!!

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27th Apr 2016 12:16

Re: John

As I understand it managers will need to make sure reasonable procedures are put in place to prevent evasion.

The new offences do not require corporations to undertake excessive due diligence, but do demand more than mere lip-service to preventing the facilitation of tax evasion.

“Those at the most senior levels of the organisation are best placed to foster a culture of compliance where actions intended to facilitate tax evasion are considered unacceptable. This principle is intended to encourage the involvement of senior management in the creation and implementation of preventative measures. It is also intended to encourage senior management involvement in the decision making process in relation to the assessment of risk, where this is appropriate for the management structure of the corporation.”

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27th Apr 2016 14:48

I don't think

this will make any difference because most of the schemes HMRC are trying to stop comes under "aggressive avoidance" and not evasion, hence the low prosecution rate. I presume then that HMRC will try to re-classify avoidance to evasion. Interesting scenario.

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27th Apr 2016 18:17

It's probably more as a result ...

... of the HSBC tax evasion scandal and other secret offshore bank accounts.

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28th Apr 2016 08:56

Reasonable

Once again a law is put into place with the horrendously subjective word "reasonable" as part of the definition. Cue lots of long-drawn out court cases on what constitutes "reasonable" procedures.

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28th Apr 2016 10:01

This may be a daft question but...

How can a 'company' commit criminal acts by virtue of its employees actions? Surely the criminal intent rests with the employees. Imprisonment of the company isn't possible, so any fine will simply be borne by the shareholders who are technically the 'company'.

How can a 'company' actually blame anybody? Isn't this more a case of senior management versus junior management? 

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to Vaughan Blake1
08th May 2016 11:55

Piercing the corporate veil. They can imprison Directors just as in any other case-so get your systems in place and have the statutory defence available. Elysium-Law Chambers can help with putting that together.

Richard Gray Barrister

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08th May 2016 11:51

In answer to John Jenkins, I assume its an offence of strict liability as opposed to conspiracy which requires intent. Oddly if I am right its the same mens rea as you (don't) have when you speed on a road. That the difference in the 'criminality' needed.

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