In our latest Governance & Compliance update, we focus on two issues: the new criminal offences of failure to prevent tax evasion; and the need for certain large businesses to publish their tax strategy.
Failing to prevent the facilitation of tax evasion
The Criminal Finances Act 2017 has created two new tax-related criminal offences for UK companies and partnerships, as well as foreign companies and partnerships with employees or agents in the UK.
You can find a detailed overview of the new criminal offences here.
- the offences are intended to create UK corporate criminal liability for a company or partnership where that entity's employee, agent, or service provider is engaged in criminal facilitation of tax evasion (which is already an offence at the level of the facilitator);
- there is a potentially unlimited fine for those convicted of either offence;
- the offences are ones of strict liability, but there is a corporate defence if "reasonable procedures" have been put in place to prevent the criminal facilitation, much like the existing Bribery Act defence. HMRC expects all UK organisations to at least carry out a risk assessment and, in most circumstances, have board-level sign off on particular policies and procedures designed to prevent such criminal facilitation;
- the offences can apply where foreign taxes are evaded, or (if UK taxes are being evaded) even where the organisation in question is outside of the UK; and
- the effective date of the new offences is not yet known, but is expected to be as early as September this year.
Publishing your tax strategy
The Finance Act 2016 introduced a requirement for large UK businesses, and UK parts of international groups, to publish an annual online tax strategy that sets out the business' approach to tax planning, tax risk, and its approach to dealing with HMRC.
A detailed overview of the requirement, along with our thoughts on how in practice businesses should be writing theirs, can be found here.
- the requirement applies to UK-headed groups, and UK sub-groups of international groups, with either a turnover of more than £200m or balance sheet assets of more than £2bn;
- the strategy has to be published in the financial year to which it relates, and not more than 15 months after the previous year's strategy was published;
- each business will want to consider who should be involved in writing its strategy (ideally, not just the tax team); and
- it should also consider how the strategy is policed in practice and how the business is run so that it can say what it wants to about tax each year.