At the end of September two new criminal offences came into effect: failure to prevent facilitation of UK tax evasion and failure to prevent facilitation of non-UK tax evasion.
These do not just apply to professional and financial services businesses which offer tax planning schemes, but to all corporates and partnerships (not sole traders), although expectations of a large international business will be higher than for a smaller, low risk one.
The only defence is that the organisation had in place ‘reasonable’ and robust procedures designed to prevent its associated persons from criminally facilitating tax evasion. All businesses therefore need to ensure that they are aware of, and have control over, how their employees, agents and service providers are operating to reduce their risk.
If this sounds daunting, HMRC has provided guidance under six principles.
Devise and implement prevention policies and procedures proportionate to the identified risks and the size of business. This might include updating existing compliance and ethics policies, adding appropriate terms to employment contracts, and implementing procedures for reporting, monitoring and enforcing compliance.
Foster a culture of ‘zero-tolerance’ from the board down, and ensure that they are involved in risk assessment and the creation and implementation of preventative procedures.
Apply appropriate due diligence procedures to anyone who is working or performing services on behalf of the business, proportionate to any identified risks.
Communicate prevention policies and procedures throughout the organisation, ensure they are understood, and provide training for staff and other associated persons.
Monitor and review prevention policies and procedures on a regular (at least annual) basis and make adjustments and improvements in response to any changes.
Many professional services firms will have some of the required processes already in place, but these will need to be reviewed, pulled together and if necessary updated. Businesses not used to this type of regulation will need to review the risks, implement appropriate procedures and ensure that all employees and agents understand what is required.