HMRC Crackdown on Facilitation of Tax Evasion

Increased pressure on HMRC to boost tax revenues due to the economic cost of COVID-19 may bring about a surge in charging decisions for failure to prevent the facilitation of tax evasion (Corporate Criminal Offences (CCO)).

The offences were introduced on 30 September 2017, by Part 3 of the Criminal Finances Act 2017. The provisions make corporate entities with a UK connection (referred to as "relevant bodies") criminally liable where they fail to prevent persons associated with them from criminally facilitating tax evasion, whether the tax evaded relates to the UK or another jurisdiction. A person is “associated” with a relevant body if they are an employee, agent, intermediary or other person who performs services for, or on behalf of, the relevant body.

HMRC confirmed on 25 August 2020, in response to a Freedom of Information request, that as at 31 July 2020, they currently have 10 live CCO investigations with a further 22 live opportunities "under review". To date no charging decisions have been made. These investigations cover sectors including financial services, oil, construction, labour provision and software development. Specifically, twelve investigations or opportunities relate to businesses in the financial sector – the part of the UK economy which provides financial services to commercial and retail customers. 

Although the legislation has been in force for almost three years, there has yet to be a prosecution. But the position may be about to change, with the need to boost HMRC coffers to pay for the Government's various schemes to kickstart a post COVID-19 recovery.

The corporate offence is a strict liability offence, and the relevant body will therefore be liable unless it can demonstrate that it had "reasonable prevention procedures" in place to prevent the facilitation (or in rare cases that it was not reasonable to expect it to have such procedures in place). The procedures should be based on six guiding principles which we discussed in detail in our previous blog on this subject. The fines for those found guilty of the offence are potentially unlimited. Aside from the implications of a prosecution, or resulting regulatory action, the reputational risk could adversely impact on the profitability of the business concerned.