Simon Airey, white-collar partner and Sarah Gabbai, tax counsel at international law firm McDermott Will and Emery, said:
“Despite the low take up by HMRC of prosecutions for enabling tax evasion, corporates cannot afford to be complacent about the UK statutory offences of failing to prevent the facilitation of tax evasion that were introduced in 2017. Though there are only nine live investigations, HMRC has announced it has a further 26 investigation opportunities under review and – partly inspired by adverse media reporting – it will be keen to demonstrate success. There is also currently a broader focus on corporate criminal responsibility in the UK, with the Law Commission having released a paper on reforming the law in this area and various legislative proposals in train to expand the categories of available offences.
The existing corporate offences of failing to prevent the facilitation of tax evasion essentially impose a form of strict liability on corporates in relation to the actions of their ‘associated persons’ such as employees, agents and intermediaries. The offences relate to the evasion of both UK and foreign taxes, and the fines that can be imposed are unlimited. The good news is that there is a complete defence in law, providing it can be shown that “reasonable prevention procedures” were in place at the relevant time – in other words, a tailored compliance programme. Companies and partnerships would therefore be wise to factor into their annual compliance budget the cost of conducting an appropriate risk assessment and designing appropriate policies and procedures. Related training, due diligence, monitoring and review are also essential – and there is a real focus on assessing board level engagement in terms of culture, governance and making sure that sufficient resources are made available. The authorities are very astute to policies that merely pay lip service to the legislation, or are not properly implemented or communicated. The risk of blow-back for senior management is therefore significant.
HMRC is well aware of the deterrent effect of prosecuting professional enablers and those who fail to prevent the facilitation of evasion. Having publicly stated its policy of targeting such persons, the current statistics which suggest a drop off can largely be ignored. There is no lack of resolve on the part of MRC, or the Crown Prosecution Service, and it is only a matter of time before the headlines tell a different story.”