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Tax Evasion Facilitators Could Face Prosecution Under New HMRC Laws

Stop facilitating tax evasion or face criminal prosecution, HMRC tells corporations they could be prosecuted if they fail to prevent staff from criminally facilitating tax evasion under a new HMRC law now in force.

In an apparent crackdown on tax evasion, new legislation which came into force on 30 September 2017 widens the responsibilities of incorporated bodies such as companies and partnerships.

Part 3 of The Criminal Finances Act 2017 deals with Corporate Offences of Failure to prevent the facilitation of tax evasion and introduces two new criminal offences into UK law, relating to the evasion of domestic and foreign taxes respectively.

The criminal offences apply to “relevant bodies” only such as companies or partnerships, not natural or legal persons. The offences criminalise failure to prevent an associated person from effectively evading tax. An “associated person” is defined as an employee, agent or other person who performs services for or on behalf of the relevant body.

The new offences can be prosecuted on indictment or at summary level and are punishable by a fine. 

Section 45 of the 2017 Act makes it a criminal offence for a relevant body to fail to prevent UK tax evasion facilitation offences by associated persons. It is a defence for the relevant body to show that at the time of the alleged offence they had in place such prevention procedures as was reasonable in all the circumstances or indeed that it was not reasonable to expect the relevant body to have any procedures in place. 

A “UK tax evasion offence” means an offence of cheating the public revenue, or an offence under any UK law consisting of being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax.

A “UK tax evasion facilitation offence” means an offence under the law of any part of the United Kingdom of either being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax by another person; aiding, abetting, counselling or procuring the commission of a UK tax evasion offence, or; being involved art and part in the commission of an offence consisting of being knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of a tax.

Section 46 makes a relevant body criminally liable if an associated person commits a foreign tax evasion facilitation offence, provided a number of conditions are met: the relevant body must be a UK company or partnership; it must carry out some or all of its business in the UK; and any of the conduct involved in the foreign tax evasion facilitation offence must have taken place in the UK. Again, as in section 45, it is a defence if reasonable prevention procedures were put in place or indeed that it was not reasonable in the circumstances to expect such offences.

It is worth noting that although s46 requires some or part of the business to be rooted in the UK, where UK tax is evaded, any company in any country in the world regardless of whether they have a UK presence can be liable. 

 “Prevention procedures” are defined as procedures designed to prevent persons acting in the capacity of an associated person from committing foreign tax evasion facilitation offences under the law of the foreign country concerned.

A “foreign tax evasion offence” means conduct which amounts to an offence under the law of a foreign country relating to a breach of that country’s tax duty, and would be regarded by UK courts as knowingly concerned in or in taking steps with a view to, the fraudulent evasion of that tax.

Likewise, a “foreign tax evasion facilitation offence” means conduct which relates to the commission by another person of a foreign tax evasion offence under another country’s law, and would, if the foreign tax evasion offence were a UK tax evasion offence, amount to a UK tax evasion facilitation offence.

While the offences outlined in sections 45 and 46 can only be committed by an incorporated body, the “associated persons” alleged to be engaged in the tax evasion offences can be a natural person or an incorporated body.

Guidance issued by the Government states that “the Government recognises that any regime that is risk-based and proportionate cannot also be a zero-failure regime” and went on to say that any relevant body capable of displaying the existence of reasonable “prevention procedures” is unlikely to face prosecution.

Responsibility for investigating UK tax evasion offences under section 45 will fall to HMRC while the Serious Fraud Office will take responsibility for investigation all section 46 offences relating to foreign taxes. The government has stated the two will work closely together to ensure a “robust response to the facilitation of tax evasion”.

The Financial Secretary to the Treasury, Mel Stride MP stated that:

“The new offences will ensure that companies doing business in the UK take reasonable steps to prevent their staff from facilitating tax evasion.”

Mark Kelly Tax Evasion Barrister London

My professional experience, approachability and considerable expertise means that you will be in a very safe pair of hands when it comes to your defence, and my track record is second to none. I consistently obtain favourable results for clients accused of a variety of white collar crimes, fraud and financial and regulatory cases.

Serving Manchester, Birmingham, Leeds, London, Bristol and the rest of the UK. If you have any queries about issues raised in this blog, or if you want to discuss your case, please do not hesitate to get in touch with me directly on 020 8108 7186 or fill out a contact form and we will get back to you as soon as possible.

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18 December 2020

I am delighted to announce that I will be appointed to the rank of Her Majesty’s Counsel (QC), with the official ceremony taking place in 2021.With a history of achieving successful outcomes as evidenced by my recent cases and testimon.

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