Criminal Finance Act 2017 and Corporate Failure to Prevent the Facilitation of Tax Evasion

Malcolm Simmons

The corporate offence of failure to prevent the facilitation of tax evasion came into force on 30 September 2017.  Under the Act a company or partnership could be prosecuted for failing to prevent its employees and other ‘associated persons’ (such as subcontractors or agents) from facilitating tax evasion in the UK and abroad. 

Previously, attributing criminal liability to a company or partnership required prosecutors to prove that the senior members of the relevant body were involved in or were aware of the illegal activity.  That was often difficult to prove. Under the Criminal Finances Act it is no longer necessary to prove that the “controlling will or mind” of a company was aware that the facilitation was taking place, merely that the company had failed to prevent such facilitation.   

The company has a defence if it is able to show that it had in place “reasonable procedures” to prevent its associated persons from facilitating tax evasion. 

As of March 2019 there have been only five investigations and no prosecutions.   

Surprisingly, a recent Ipsos Mori poll commissioned by HMRC reported that only one quarter of all businesses surveyed were even aware of the Criminal Finance Act 2017 and only 24% had assessed the potential risk of being exposed to the facilitation of tax evasion by their business.