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The draft guidance sets out six principles which businesses should take into account in formulating procedures to prevent themselves from falling foul of the new offence,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