Corporate Criminal Offence – What you need to know and FAQs

21 August 2019

Since September 2017, HMRC has had increased power to crack down on corporate tax evasion. The Criminal Finances Act 2017 enabled criminal liability for facilitated tax evasion to be assigned to entities rather than just individuals. The intricacies of the legislation were evaluated in our article ‘How your business can be held criminally liable’.

The Criminal Finances Act 2017

Almost two years on, we have seen HMRC add extra resources to its Fraud Investigations team to tackle the ‘Corporate Criminal Offence’ (CCO) of failing to prevent the facilitation of tax evasion. HMRC have allocated an additional 500 roles within their Fraud Investigation Service: HMRC case managers have been trained to discuss CCO with large businesses; and, HMRC have opened investigations into 27 large UK businesses and 200 mid-sized businesses in relation to tax evasion across a variety of sectors.

In December 2018, HMRC released a research report entitled ‘Evaluation of corporate behaviour change in response to the corporate criminal offences’. The key research objectives were to examine:

  • Companies’ and partnerships’ awareness of the new corporate criminal offences; and
  • The extent to which the introduction of the corporate criminal offences has resulted in changes to the culture and behaviour of companies and partnerships.

The results were alarming:

  • Only 25% of businesses surveyed had heard of the of the Criminal Finances Act 2017
  • Of businesses outside the financial and insurance sectors, only 24% were aware of the legislation
  • Respondents were asked to describe how relevant the Act was to their business and only 32%) believed the Act was relevant to their business to ‘at least some extent’, with just 9% saying it was relevant ‘to a great extent’.
  • HMRC’s guidance stresses the need for companies to assess the risk of being exposed to the facilitation of tax evasion by those providing services on their behalf, but only 24% of respondents had done so, and most did not have the risks formally documented.

Does this affect me?

If the business is a company or a partnership, any size, any industry, it affects you.

What are the risks of inaction?

If successfully prosecuted, aside from the significant reputational damage and adverse publicity the business may face, it could be liable to an unlimited fine and public record of the conviction.

What action has HMRC taken since the legislation came into force?

HMRC is taking the legislation very seriously. CCO investigations have begun, some off the back of dawn raids. Staff are being interviewed to see what they know of CCO and whether they have been trained by the business on what to look out for to identify tax fraud.

HMRC has made it clear that evidence of a risk assessment having taken place with associated prevention procedures identified and implemented, all of which has been clearly document is the key line of defence.

We haven’t done much, what should we be doing now?

This should be the easy part. HMRC have very prescriptive guidance on what businesses need to do; the key thing is to get this done and document it. MHA MacIntyre Hudson’s own Business Planning Guide enables businesses to navigate through this process themselves, but if the thought of this is daunting, we can provide a fee quote for helping you with:

  • Carrying out a risk assessment and formulating prevention procedures;
  • Developing an implementation plan for training, communications and a monitoring and review process;
  • Developing a suite of policies for the business;
  • Documenting all findings in a report;
  • Providing training resources to enable you to educate members of your staff on the legislation and support your procedures in preventing the facilitation of tax evasion.

Get in contact

For help and advice on any of the above, please get in touch with our Corporate Criminal Offence Specialist, Androulla Soteri.