HMRC has opened a second consultation in relation to draft legislation for the corporate offence of failure to prevent the criminal facilitation of tax evasion.
The first consultation on this new offence took place in July 2015 with a first draft of the legislation being produced in December 2015. A revised draft has now been produced, and it:
- extends the circumstances in which a relevant body can be prosecuted to include an act or omission;
- narrows the definition of the circumstances in which a facilitation of UK tax evasion can occur;
- creates a new defence that it was not reasonable to expect the corporation to have established prevention procedures when the offence was committed.
The offence would apply to all businesses, and be applicable only in respect of tax evasion (which is illegal), as opposed to tax avoidance (which is legal).
Where a corporate entity fails to prevent its employees, agent(s) or subsidiaries (defined in the Bribery Act 2010 as ‘associated persons’), from criminally facilitating the evasion of tax by a taxpayer, the corporate entity will be guilty of the new offence.
The new offence will arise where:
- there is a failure to prevent facilitation by a corporation resulting in a UK tax loss; or
- there is a failure to prevent facilitation by a corporation resulting in a tax loss overseas, where the jurisdiction being deprived of tax has a similar failure to prevent offence.
The draft legislation indicates that penalties will be levied against corporate bodies guilty of the offence.
In addition to a new corporate offence of failure to prevent criminal facilitation of tax evasion, the government have also announced plans to consult on a corporate offence of failure to prevent fraud or money laundering. See Kate Hall’s article on these developments.