Following several Freedom of Information Act requests, HMRC has published statistics on investigations opened under powers in the Criminal Finances Act 2017 into the corporate criminal offences of failure to prevent facilitation of tax evasion.
As at 31 December 2019, HMRC had nine live investigations underway, with a further 21 opportunities under review across ten different business sectors, including financial services, oils, construction, labour provision and software development. These sit across all HMRC customer groups from small business through to some of the UK’s largest organisations.
The new offences came into effect on 30 September 2017 and are applicable to organisations that have failed to prevent their employees from facilitating tax evasion. Successful prosecutions can result in unlimited fines and a criminal record for a business, restricting access to some regulated markets and ability to bid for government contracts in the UK and overseas.
Andrew Sackey, partner at Pinsent Masons, commented that HMRC had been ‘quick out of the blocks’ to make use of these powers.
‘HMRC is very effective in being able to spot breaches under these laws’, Sackey added. ‘Investigation teams are increasingly conducting tax evasion investigations as normal (using either civil or criminal powers) and then exploring whether there has been a facilitation by someone associated with a corporate and, if so, testing if the corporate has the right controls in place. This makes it simpler to identify, investigate and subsequently prosecute non-compliant businesses.’
The new joint chiefs of global tax enforcement (J5) alliance of tax authorities from the UK, Canada, the Netherlands, US and Australia is also providing HMRC with assistance, training investigators with foreign tax authorities to spot indicators of the corporate criminal offence.
Andrew Sackey warned that HMRC and the SFO are increasingly cooperating on investigations, meaning that ‘in cases where an act of bribery is suspected it’s probable that the agencies will explore to what extent UK or foreign taxes may have been improperly impacted. This means businesses could face investigations on multiple “failure to prevent” fronts at once’.
Jason Collins, partner at Pinsent Masons, commented: ‘Asset managers and private banks are obvious targets for HMRC’s activities. Infrastructure, haulage, labour service providers and construction businesses, indeed any sectors that have lengthy supply chains or extensively use contractors also look particularly vulnerable to investigations under these rules’.
‘Reasonable prevention measures for the corporate criminal offence follow the principles of the Bribery Act, which means putting in place bespoke prevention measures. Failure to do this could leave corporates without a defence’, Collins added.
HMRC says it intends to update information on its corporate criminal offences investigations biannually. See bit.ly/2ULnL34.
Following several Freedom of Information Act requests, HMRC has published statistics on investigations opened under powers in the Criminal Finances Act 2017 into the corporate criminal offences of failure to prevent facilitation of tax evasion.
As at 31 December 2019, HMRC had nine live investigations underway, with a further 21 opportunities under review across ten different business sectors, including financial services, oils, construction, labour provision and software development. These sit across all HMRC customer groups from small business through to some of the UK’s largest organisations.
The new offences came into effect on 30 September 2017 and are applicable to organisations that have failed to prevent their employees from facilitating tax evasion. Successful prosecutions can result in unlimited fines and a criminal record for a business, restricting access to some regulated markets and ability to bid for government contracts in the UK and overseas.
Andrew Sackey, partner at Pinsent Masons, commented that HMRC had been ‘quick out of the blocks’ to make use of these powers.
‘HMRC is very effective in being able to spot breaches under these laws’, Sackey added. ‘Investigation teams are increasingly conducting tax evasion investigations as normal (using either civil or criminal powers) and then exploring whether there has been a facilitation by someone associated with a corporate and, if so, testing if the corporate has the right controls in place. This makes it simpler to identify, investigate and subsequently prosecute non-compliant businesses.’
The new joint chiefs of global tax enforcement (J5) alliance of tax authorities from the UK, Canada, the Netherlands, US and Australia is also providing HMRC with assistance, training investigators with foreign tax authorities to spot indicators of the corporate criminal offence.
Andrew Sackey warned that HMRC and the SFO are increasingly cooperating on investigations, meaning that ‘in cases where an act of bribery is suspected it’s probable that the agencies will explore to what extent UK or foreign taxes may have been improperly impacted. This means businesses could face investigations on multiple “failure to prevent” fronts at once’.
Jason Collins, partner at Pinsent Masons, commented: ‘Asset managers and private banks are obvious targets for HMRC’s activities. Infrastructure, haulage, labour service providers and construction businesses, indeed any sectors that have lengthy supply chains or extensively use contractors also look particularly vulnerable to investigations under these rules’.
‘Reasonable prevention measures for the corporate criminal offence follow the principles of the Bribery Act, which means putting in place bespoke prevention measures. Failure to do this could leave corporates without a defence’, Collins added.
HMRC says it intends to update information on its corporate criminal offences investigations biannually. See bit.ly/2ULnL34.
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