Criminal Finances Act 2017 – are you compliant?

Are you compliant with changes which came into force on 30 September 2017?

As part of a HM Revenue & Customs initiative to tackle tax evasion, new criminal offences came in to force on 30 September 2017 which could impact your business.

From 30 September 2017, the Criminal Finances Act (CFA) 2017 makes companies and partnerships criminally liable if they fail to prevent those who act for, or on their behalf, from criminally facilitating tax evasion.

Tax evasion has always been illegal. However, the new rules affect companies and partnerships if it can be shown that the organisation did not have reasonable preventative measures in place to prevent the evasion occurring.

There are three stages of criminal tax evasion:

  1. Criminal tax evasion by a taxpayer.
  2. Criminal facilitation of the tax evasion by an associated person of the relevant body.
  3. The relevant body failed to prevent to representative from committing the criminal act.

In summary, if a company does not have policies in place intended to prevent tax evasion, they are at risk of being caught out by the new offences.

What is at risk?

A prosecution could lead to both a conviction and unlimited penalties, as well as a damaged firm reputation.

What do you need to do?

A business may avoid prosecution if it can prove it put reasonable preventative procedures in place. The requirement to put in place reasonable preventative measures has been in force since 30 September 2017.

If you have not addressed this issue for your business, we recommend you take steps now. Companies and partnerships need to assess what steps they need to take to ensure they comply with the legislation. Complex and large companies are particularly at risk as they can be more difficult to control.

We have listed below the reasonable preventative procedures that should be taken:

  1. Carry out a risk assessment to identify risks involved.
  2. After reviewing any risks, a firm should look at its preventative procedures currently in place and upgrade if necessary. Procedures we recommend include staff training, providing a safe environment for staff to report concerns, amending employee contracts to include clauses regarding tax evasion or regularly monitoring preventative procedures.
  3. Ensure there is a top level commitment within the firm to prevent the facilitation of evasion. Show the workforce that the firm is committed to preventing the facilitation of tax evasion.
  4. Carry out frequent due diligence by regularly reviewing procedures in place, amending when necessary to suit different types of risk.
  5. Communication is key and training should be given to all levels of staff on the risks involved and procedures in place.
  6. Ongoing monitoring and reviews of procedures and risk assessment should be performed.

The CFA 2017 also allows for an Unexplained Wealth Order to be served on individuals suspected of crime. This is to explain the source of their wealth where there is a ‘reasonable cause to believe’ that an individual holds property and there are ‘reasonable grounds for suspecting’ that their lawfully obtained income is insufficient to obtain the property.

Examples of preventative procedures

At Tait Walker we have already put procedures in place and made appropriate changes. An example of the communications we have sent to our staff notifying them of the changes is shown here.

If you would like additional details of how your business should ensure that it is compliant with the Criminal Finances Act 2017, please contact either Laura Dickson or Alastair Wilson.

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