Results from a  YouGov survey carried out in April, revealed that more than three-quarters (76%) of senior decision makers in British businesses are unaware of a new law which could make their failure to prevent tax evasion in their company a criminal offence.

Under the new law the business could be found guilty of a criminal offence even if the senior management were not involved, or even aware of it.

The new Criminal Tax Evasion Laws were announced in 2015 and has now been included in the Criminal Finance Act, after the BBC Panorama programme revealed the activities of HSBC employees in Switzerland which, under existing rules, could not be blamed on HSBC.

The new Criminal Tax Evasion Laws have been designed to prevent businesses ‘turning a blind eye’ to activities of their staff and other representatives.

This means that now all businesses, not just those in the finance sector, will need to prove that they have in place reasonable prevention procedures. The level required will depend on the nature and size of the business; but all businesses are expected to have carried out and have proof of risk assessment.

There will be two new offences.

The first will apply to all businesses, wherever located, in respect of the facilitation of UK tax evasion. Tax evasion is where a person, organization or corporation intentionally avoids paying his true tax liability.

The second will apply to businesses with a UK connection in respect of the facilitation of non-UK tax evasion. The offences will apply to both companies and partnerships.

There are two stages for the new corporate offences to apply:

  • criminal tax evasion – not avoidance – must have taken place; and
  • a person or entity associated with the business must have criminally facilitated the tax evasion while performing services for that business.

If these two stages have taken place, the business will have committed one of the new offences, subject to the defence of ‘reasonable prevention procedures’.

Smaller businesses will need to undertake a risk assessment of the products and services they offer, as well as their internal procedures and any client and supplier data that might use to facilitate evasion. The measures taken must be comparable to risk.

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