The new corporate offences of failing to prevent the facilitation of UK and non-UK tax evasion create potential liability on employers for their staff’s actions. These new offences are contained within the Criminal Finances Act, which became effective on 30 September 2017.
If an employer is found to be guilty of one of the new corporate offences, they may be liable to receive an unlimited fine along with other sanctions which may include confiscation of assets. This is notwithstanding the potential for reputational damage to the employer’s business.
An employer will have a defence to the new corporate offences if it can prove that when the corporate offence was committed, it had in place ‘reasonable prevention procedures’. This approach largely mirrors the Bribery Act 2010 and can be summarised as follows:
Undertaking a risk assessment to identify specific risks of facilitation;
Implementing procedures proportionate to the specific risk;
Performing due diligence of staff, third parties and clients;
Ensuring a high-level commitment within the business to prevent tax evasion and the facilitation of tax evasion;
Training staff and third parties to ensure procedures are understood and implemented;
Ongoing monitoring and review of risks and the procedures adopted.
It follows that employers are well advised to complete a risk assessment to understand their key risks. These could concern but are not limited to VAT, corporation tax and employment taxes. Employers should also ascertain the staff members within the business who could facilitate, whether deliberately or unwittingly, tax evasion.
Employers should also have clearly documented procedures and controls dealing with each identified risk and should ensure that they are monitoring and reviewing regularly and updating, as necessary.
The Government has published guidance - “Tackling tax evasion” - which can be found on the government website and is intended to help employers understand what procedures and processes can be implemented to prevent them from criminally facilitating tax evasion.
If you have any questions or queries, please get in touch with a member of our Employment Law team.