Practical implications of the Criminal Finances Act 2017 (“FCA”)

The Criminal Finances Act 2017 made it possible to prosecute companies and partnerships for facilitating tax evasion.

Practical implications

As a result, we are starting to see some practical implications. This includes:

  • Transactions – purchasers are requiring evidence of CFA risk management procedures upon the sale of a business
  • Audit – some auditors of larger clients are requesting copies of risk assessments as part of their work

Consequences of tax evasion

If an employee or “associated person” of a business is caught facilitating tax evasion, then the business can face the following:

  • Unlimited fines
  • A corporate criminal conviction
  • Exclusion from public procurement markets
  • Reputational damage

HMRC’s six key principles

HMRC’s guidance explains that there is a defence from prosecution. This is that reasonable procedures to mitigate tax evasion have been put in place. HMRC set this out into six key principles:

  1. Risk assessment
  2. Introduction of risk based prevention procedures
  3. Top level commitment
  4. Due diligence
  5. Communication and training
  6. Monitoring and review

The amount of work required to follow HMRC’s guidance will depend upon the business’ size, complexity, nature and risk profile. However, we would strongly recommend taking action to manage and mitigate risk.

Contact us

If you would like to discuss this further, then please do not hesitate to contact Andrew Fitton, Alastair Wilson or Louise Cottam.

In the meantime, you can find further information on the website.