The Corporate Criminal Offence (HMRC CCO) is a not-so-new statutory offence under the Criminal Finances Act 2017, which applies to the evasion of any tax (including indirect taxes), anywhere in the world. It places significant responsibility on businesses to ensure that they have processes in place to ensure the ‘prevention’ of tax evasion (committed on their behalf, by them, or by their employees facilitating their clients’ tax evasion).
The legislation came into effect on 30 September 2017.
There are two separate offences under the HMRC CCO legislation:
- The facilitation of UK tax evasion by any businesses, wherever located; and
- The facilitation of non-UK tax evasion by businesses with a UK connection.
Therefore, all businesses are within scope and there is no de-minimis limit. Any business will have a strict liability under criminal law for failing to prevent the facilitation of tax evasion by one of its associates (i.e. employee, contractor or any person providing services for or on its behalf), even if the senior management team was not involved in, or aware of, the facilitation of tax evasion.
Why did it come in
HMRC have previously struggled to attribute criminal liability to corporates when one of their employees/associates have facilitated tax evasion for a customer or supplier; corporate criminal offence. They had to prove that a member of senior management knew about it to help shift some responsibility higher.
Under the HMRC CCO, it is the corporate that is subject to prosecution without the need for prosecution of any junior individual or associate. This makes it easier for HMRC to impose sanctions and for corporates being unable to avoid being caught by ‘protecting’ the board members from information.
The legislation is likely to be used in two ways:
Where a person has been caught evading tax, then HMRC will utilise this legislation to understand the role played by entities connected to the taxpayer, and whether there is a systemic fault which should be punished.
We have seen ‘ad-hoc’ checks of corporate fraud prevention procedures by HMRC. It follows that if HMRC determine that the policies and procedures are not sufficiently robust, they enquire further into your client base, and usually your wider associates.
Who does it impact
HMRC CCO impacts all businesses both in the UK and the rest of the world. Business leaders need to understand how they will be affected and the steps they need to be taking to ensure they are protected.
It has a significant impact on the financial services, accounting, tax and legal sectors. Accountants specifically need to take care as they could become conflicted if HMRC insinuate that one of their clients has committed tax evasion. In these circumstances it is advisable for the investigation to be handled by an independent third party.
HMRC want to push the onus onto large businesses so that they already have procedures in place to ensure, as far as possible, that their supply chain is tax compliant, such that the Corporate Criminal Offence should not be triggered.
A successful prosecution under the HMCR CCO could lead to an unlimited fine, public record of the conviction and significant reputational damage. The business’ only line of defence is that it already had ‘reasonable prevention procedures’ in place or that it was not reasonable in the circumstances to expect there to be procedures in place.
‘Reasonable’ is accepted to mean that the corporate should:
- Identify, categorise and document the specific risks of facilitation of tax evasion,
- Identify existing controls in place to manage those risks,
- Put a plan in place to address any identified shortfall in procedure,
- Communicate and train employees and relevant associates, and
- Undertake ongoing monitoring and review
Standard ‘Know Your Client’ and AML checks are not sufficient, so all additional considerations must be documented and demonstrable.
How we can help?
How we can help?
We believe it’s in a client’s best interest to discuss these types of matters with an ‘independent specialist’ even if there are no discrepancies to disclose. The right help at the right time ensures that HMRC are effectively managed and investigations are concluded expertly and expeditiously.
Our team are experts at resolving contentious tax issues accurately and efficiently. We are highly adept at managing our clients’ interactions with HMRC to ensure processes run smoothly and that our clients’ interests are best protected at all times. The Corporate Criminal Offence appears to be used following findings of tax evasion/fraud in civil cases like COP9 or threatened during the course of those investigations.
Importantly, we deliver that all-important trusted ‘buffer’ between our client and HMRC during their in-depth and intrusive investigations and in all disclosures too. With the HMRC CCO in mind, one should ensure strategies are already in place to minimise or avoid corresponding risks of attack.
Get in touch to learn more about how Amit and the Tax Investigations and Disputes team have successfully guided clients through the WDF disclosure process, and COP9 or COP8 investigation processes as well.
Learn more about how we have helped our clients through their kind testimonials here.
HOW CAN PURE TAX HELP?
At Pure Tax our Tax Investigation & Disclosure specialists are industry recognised and have dealt with hundreds of contentious situations with HMRC over the years. We are adept at managing interactions with the tax authorities to ensure that the investigation and disclosure processes run smoothly and that your interests are best protected.
