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Criminal Finances Act 2017: Latest Developments

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Part 3 of the Criminal Finances Act 2017 was introduced to stop bosses claiming ignorance of their employees’ actions when it comes to helping clients evade tax.  The tax evasion by the client was already a crime; the employee helping the client evade the tax was already breaking the law but the senior management at a business would often claim they did not know what their employee was up to. This is no longer going to protect senior management from prosecution.

As a result a Corporate Criminal Offence (CCO) was introduced for the failure to prevent the facilitation of tax evasion. The failure by a business to put reasonable prevention procedures in place can lead to prison time or an unlimited fine for the senior management of the firm. This applies to any business, other than a sole trader, who has at least one employee. Further details on the implications of the CFA 2017 can be found below:

HMRC have just issued their latest update on their CCO investigations.

As of the end of May 2021 HMRC have 28 cases underway. These investigations span 10 different business sectors, including financial services, oils, construction, labour provision and software development. This demonstrates that whilst the legislation was instigated with Financial Services in mind the implementation of this legislation has gone much wider.

Perhaps more relevant to a lot of clients is not the handful of cases HMRC are investigating but the implications on selling their business. It has now become a standard question in a legal due diligence to ask what reasonable prevention procedures you have in place. To that end Menzies can help. We have produced a Criminal Finances Act Compliance pack which can help get you started on the way to putting the required reasonable prevention procedures in place.

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