Reed Smith Client Alerts

The United Kingdom’s Criminal Finances Act 2017 (the “Act”) creates two new corporate offences of failure to prevent facilitation of tax evasion (the “Corporate Offences”). These new Corporate Offences will be committed where a relevant body fails to prevent an associated person criminally facilitating the evasion of tax, whether the tax is evaded in the UK or in a foreign country. The new offences therefore have far-reaching implications for any international business that comes within the jurisdiction of the UK. Read our summary of what this might mean for your business below.

Like the corporate offence contained in the UK Bribery Act 2010, prosecutors will no longer be required to show that a senior member of a relevant body was involved in and aware of the illegal activity for criminal liability to be attributed to the relevant body.

The Act received Royal Assent on 27 April 2017 and the Corporate Offences are due to come into force on 30 September 2017.

Key Elements of the Corporate Offences

There are two Corporate Offences set out in the Act:

  • Failure to prevent facilitation of UK tax evasion offences.
  • Failure to prevent facilitation of foreign tax evasion offences.

Government guidance on the Corporate Offences issued in October 2016 identified three elements to each of the Corporate Offences:

  • Criminal tax evasion by a taxpayer (either an individual or a legal entity).

    No conviction of the taxpayer is required before a prosecution can be brought against a relevant body although the prosecution would still have to prove, to the criminal standard of beyond all reasonable doubt, that the taxpayer-level offence had been committed.

    For an offence to constitute a foreign tax evasion offence, it must be a criminal offence under the law of a foreign country and be conduct which would be regarded by the UK courts as amounting to being knowingly concerned in, or taking steps with a view to, the fraudulent evasion of tax.

  • Criminal facilitation of the tax evasion by a person associated with the relevant body.

  • Failure by the relevant body to prevent the associated person from committing the criminal facilitation act.

    The Corporate Offences are strict liability offences. If there is criminal tax evasion by a taxpayer and an associated person criminally facilitated that tax evasion, the relevant body will have committed one of the Corporate Offences unless it can show that it had reasonable preventative procedures in place.