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06 Nov 2017

Jessica Parker comments on the facilitation of tax evasion in economia

Accessory to evasion

Her Majesty’s Revenue and Customs (HMRC) has launched its new weapon in the war on tax cheats – an offence of “failure to prevent the facilitation of tax evasion”. The mechanism started ticking for real on 30 September.

But many firms have already shrugged their shoulders, given a resigned sigh, and started to put in the extra work to make sure they stay on the right side of the new law.

There are two steps to safety. First, the company or partnership needs to show it has procedures in place designed to prevent “associated persons” from facilitating tax offences. Second, it must show that the procedures were reasonable.

Partner Jessica Parker commented:

“The key feature distinguishing the new offence under the CFA and previous routes to corporate criminal liability is that an employee at any level can incur liability, as can anyone who performs services for a business, consultants for example.  The wide definition of associated persons means that a business needs to consider their external relationships as well as their internal systems.

“In order for an associated person to have committed facilitation of tax evasion they need to have intended the criminal action.  All the offences included in the definition of facilitation – aiding, abetting, counselling or being knowingly involved in or taking steps with a view to the fraudulent evasion of tax by another person – require the facilitator to have the same intent as the tax evader. Usually this is dishonesty, but it can also be the intention to deceive.

“Many firms who know and trust their employees may assume that their staff and consultants are unlikely to have such criminal intent, but the offence gives HMRC scope to query whether a firm has done enough, or taken reasonable steps,  to ensure that they have mitigated this risk.  It is the increased risk of investigation that businesses have to fear.

The new offence enables HMRC investigations to look further into the business of advisers.  By way of example, if an accountancy firm gives advice which is used by a fraudster to add legitimacy to a fraudulent evasion scheme, HMRC may query whether any employee or other associate of the suspect’s adviser has in any way connived with the offending.   If fraudulent returns are submitted on behalf of a client, HMRC can ask itself whether the person submitting was aware of the falsity. In these examples, HMRC can then go on to ask the employer company what procedures they had in place to prevent such activity.”

Read the full article in economia here.