UK tax office details new "evasion facilitation" offence

Added 18th April 2016

The British government has published details of its proposed new law making senior management of a financial services firm criminally liable if any member of staff facilitates tax evasion, and has called on the industry to provide feedback.

UK tax office details new "evasion facilitation" offence

HM Revenue and Customs (HMRC) said in a consultation paper released on Sunday, that it is seeking comment on how the new law is best expressed in statute and guidance. The consultation period runs from 17 April to 10 July 2016.

The new law is designed to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf.

“The criminal law currently renders corporations that refrain from implementing good corporate governance and strong reporting procedures hard to prosecute, and offers no incentive to invest in such procedures,” HMRC said.

“It is those corporations that deliberately turn a blind eye to wrongdoing and preserve their ignorance of criminality within their organisation that the current criminal law most advantages,” it said.

The government first proposed toughening up the law on tax evasion in its March 2015 budget. A public consultation ran from July to October 2015 and the result of that exercise was published on 9 December 2015.

Prime minister David Cameron announced last week that the proposed new legislation would be introduced later this year after this new consultation concludes.

Work-related crime

The proposed new law states that a relevant body, defined as body corporate or partnership, is guilty of an offence if it fails to prevent an associated person criminally facilitating the evasion of a tax when that person is acting on its behalf.

The requirement that the person be acting on behalf of the corporation means that the offence would be committed where an employee, during the course of his or her work, facilitated tax evasion by a customer; but would not be committed where that same individual, outside of his or her work, facilitated tax evasion by advising, for example, a family member.

“Such a case would be a “frolic of the employee’s own” and nothing to do with the corporation whatsoever,” HMRC said.

Tax evasion defined

The government plans to make a number of changes to the law to clarify and refine the term “tax evasion facilitation offence.”

“UK tax evasion offence means:

(a) an offence of cheating the public revenue, or

(b) an offence consisting of being knowingly involved in, or in taking steps with a view to, the fraudulent evasion of a tax, or

 (c) any other offence under an enactment which may be indicted as an offence of cheating the public revenue.”

Offshore application

The new offence will also apply whether the undeclared funds are in or outside the UK.

The government believes that corporations with a presence in the UK should be obliged to take reasonable steps to prevent their agents being complicit in criminal tax evasion, wherever that tax is owed.

The consultation paper states that the new law will make clear that if the evasion of tax is a crime in a foreign jurisdiction then corporations should take reasonable steps to prevent their agents becoming complicit in the criminal evasion of those taxes.

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Richard Hubbard

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Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.



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