On 17 April 2016, HMRC published a consultation document titled ‘Tackling tax evasion: a new corporate offence of failure to prevent the criminal facilitation of tax evasion’.
This follows an earlier related consultation in July 2015 and the response document of December 2015 which contained a first draft of the legislation. In their latest consultation, HMRC is inviting feedback on the wording of the new corporate criminal offence and how this policy is best expressed in statute and guidance.
Additionally, this consultation seeks stakeholder views to ensure that the offence is both effective at meeting the stated objectives, and not unduly burdensome.
At the March 2015 Budget, the UK Government announced that it would introduce a new criminal offence to apply to corporations who failed to prevent their agents from criminally facilitating tax evasion. An initial public consultation ran from July - October 2015.
The consultation response document was published on 9 December 2015. Arising from this, the Government announced that it will be legislating for the new offence and consulting on draft legislation and guidance at the beginning of 2016.
The new corporate offence aims to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf.
Whilst this consultation refers to the application of the new offence to “corporations”, the draft legislation refers to a “relevant body” to encompass the broad range of legal persons to which the new offence will apply.
Updated draft legislation and guidance
To be operative, the offence requires two prior criminal acts:
- By a taxpayer (either a legal or natural person) under existing criminal law (e.g. cheat or fraudulently evading the liability to pay VAT);
- By a person associated with the corporation, knowingly concerned in; or aiding, abetting, counselling, or procuring the tax evasion by the taxpayer.
- In the event of such circumstances a failure to take reasonable steps to prevent those who acted on its behalf from committing the criminal act could render the business liable under either of the offences.
Since publication of the initial December 2015 response document, there have been a number of changes to the proposed draft legislation which in summary, include amongst others:-
- Currently, the offence is in fact two offences, one relating to evasion of UK taxes and one for foreign taxes;
- Correspondingly, there are now two possible defences, specifically, that the business had in place prevention measures as was reasonable in all circumstances to expect it to have, or that considering all the circumstances, it was not reasonable to expect it to have any prevention procedures in place;
- The circumstances in which a business could be prosecuted for failing to prevent the facilitation of foreign tax evasion offences has been expanded;
- The offence of failing to prevent facilitation of foreign tax offences is limited to foreign tax offences which would also be an offence is committed in the UK.
Comments and responses in respect of this consultation document have been requested by 10 July 2016.
Disclaimer: This Blog posting contains general information only and should not be read as a comprehensive analysis of the subject matter nor construed as professional services or advice to be relied upon. Before taking any decision or action in relation to the matters described herein, we would recommend that you contact a qualified professional advisor.