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Policy & Compliance


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an associated person of yours is aware of that status and aware of the need to prevent tax evasion (either UK or non-UK tax evasion) and you may wish to include in the policy a duty on employees to report to management any suspected wrongdoing, or attempted wrongdoing, of customers or suppliers in terms of tax evasion, so that the matter of how to deal with the situation is appropriately escalated. Fourthly, you then need to carry out due


The Criminal Finances Act 2017 – are you ready?


Now in force, this act can result in severe penalties being imposed on your company if an ‘associated person’ facilitates UK, or non-UK, tax evasion


The Criminal Finances Act 2017 came into force on 30 September. It introduces two new offences that apply to companies and partnerships, so if you are a private limited company, a public limited company, a partnership or a limited liability partnership, you need to consider how to protect yourself from being prosecuted for: (a) failing to prevent the facilitation of UK tax evasion by an associated person; (b) failing to prevent the facilitation of non-UK tax evasion by an associated person. It is important to get suitable policies and


procedures in place to ensure no facilitation occurs as if successfully prosecuted in respect of these new crimes, unlimited fines may be imposed. This is not the only sanction that may apply as there are other potential ancillary orders that may be made including confiscation, serious crime prevention orders, loss of operating licences, and prohibition from bidding for public contracts. In addition, of course, criminal offences carry the likelihood of reputational damage, which could lead to significant loss of custom. Firstly you need to assess who may be


considered to be “an associated person”. They may be an employee, or an agent of yours acting in the capacity of an agent, or any other person performing services for you who is acting in the capacity of performing such services.


14 Secondly, you need to identify whether that


‘associated person’ has the ability to facilitate tax evasion whilst carrying out their duties for you. This would involve carrying out a risk assessment of the potential for tax evasion by your customers or suppliers. Whilst they may have the facility to commit crimes of tax evasion, associated persons may be able to help them do that, perhaps unwittingly thinking they are being helpful, or they may realise that something wrong is being done but do nothing about it.


Unacceptable practices This is no longer acceptable. Are goods being undervalued or improperly described by your customers to avoid or reduce liability for import VAT or duty? Are goods being taken into a bonded warehouse operated by you and then treated as a zero-rated sale when broken down, picked and packed and delivered to the end- customer, to avoid collection of VAT from the end-customer and accounting to the revenue for VAT? Is any associated person in a position to facilitate such action? These are the questions that need to be asked and this should be done by senior management. Are you being asked to pay a different company to your supplier who is offshore? Thirdly, you need to put policies and


procedures in place to ensure that anyone who is


diligence of all staff members, agents, customers and suppliers. The policies, procedures and due diligence need to be proportionate to the risks involved. Therefore, when carrying out your risk assessment you should grade the seriousness of each individual area of risk and tailor your actions to the particular level of risk concerned. Due diligence may involve changes of relevant contracts in place (with employees, agents, customers and suppliers), training and management.


Essential commitment Fifthly, it is critical that those responsible for running the company or partnership are absolutely committed to prevention of facilitation of tax evasion. Without that commitment, the likelihood is that staff, agents and other associated persons may not take their duties seriously. Sixthly, communication of the policies and


procedures is of significant importance as associated persons need to understand their duties and be ready to undertake them. Training is the obvious way of ensuring communication. Finally, mentoring, monitoring and reviewing


will be important to ensure that training is put into practice on a day-to-day basis and that the risk assessment is updated, if necessary, or indeed the policies and procedures. All of these requirements may sound daunting,


but it is important to make sure you undertake them and soon, as this Act is already in force and you have to be ready to be able to prove that you have a defence to the new crime of failing in the prevention of tax evasion, whether UK tax evasion on non-UK tax evasion. For detailed HM Revenue & Customs (HMRC)


guidance, use this link to reach the 48-page booklet taking you through the new offences and giving assistance on what is expected by the authority charged with ensuring compliance and where necessary carrying out prosecutions: www.gov.uk/government/uploads/system/upload s/attachment_data/file/642714/Tackling-tax- evasion-corporate-offences.pdf Website: www.pysdens.com BIFA would like to thank Kay Pysden of Pysdens Solicitors for preparing this article.


December 2017


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