On 21 February 2019 HMRC issued self-reporting guidance in relation to the corporate criminal offence under the Criminal Finances Act 2017 of failure to prevent criminal facilitation of tax evasion.
The Criminal Finances Act 2017, which came into force on 30 September 2017, makes certain corporate entities (referred to as "relevant bodies") criminally liable where they fail to prevent persons associated with them from criminally facilitating tax evasion, whether the tax evaded is owed in the UK or overseas. A person is “associated” with a relevant body if they are an employee, agent, intermediary or other person who performs services for or on behalf of the relevant body. The definition is intended to be wide. The corporate offence is a strict liability offence, and the relevant body will therefore be liable for prosecution unless it can demonstrate that it had "reasonable prevention procedures" in place to prevent the facilitation (or in rare cases that it was not reasonable to expect it to have such procedures).
The HMRC guidance states that if an authorised representative of a company self-reports then that can be: (i) used as part of the reasonable procedures defence; (ii) taken into account by prosecutors when making a decision about a prosecution; and (iii) reflected in any penalties imposed. It does not however guarantee that the company will not be prosecuted and may indeed kick start that process. We would therefore advise companies to be cautious and seek legal advice before self-reporting.
The publication of this guidance suggests that HMRC is gearing up to start investigating the failure to prevent offence and may be seeking its first prosecutions. There were indications towards the latter part of 2018 that HMRC was increasingly likely to take an aggressive approach to enforcement given the Criminal Finances Act had been in force for over a year and any grace period for companies to get their processes and procedures in order was over. The publication of the guidance serves as timely reminder to companies to ensure that they have put in place reasonable prevention procedures, as no-one wants to have the dubious honour of being the first prosecution under this legislation.
Please contact us if you have any questions or concerns regarding a tax evasion issue, self-reporting, or reasonable prevention procedures.