Criminal Finances Act

The Criminal Finances Act 2017 (CFA) came into force on 30 September 2017. The law applies to all companies and partnerships but not sole traders. On the introduction of this act every employer in the country has an obligation to actively discourage their employees assisting customers evade tax. This affects all businesses (not sole traders) that have at least one employee. The penalty for non-compliance is 12 months in prison or an unlimited fine.


The Criminal Finances Act introduces the new crime of “Failing to Prevent the facilitation of Tax Evasion”. Businesses need to be aware what this means for them and their senior management.


1 – Firstly, there must be a criminal offence committed by a customer of your business. If there is no offence by your customer then the business’ senior management cannot be penalised. Whether a conviction against the customer is secured or not is irrelevant as the taxpayer may make a full disclosure or HMRC may decide not to prosecute. The offence was still committed even if the individual is not prosecuted.

2 – As a second stage the tax evasion must have been facilitated by someone representing the business. This could be an employee, but also an agent or consultant who represents your firm.

3 – The senior management of the business failed to put in place reasonable prevention procedures.

The defence

The crime is being treated as what’s known as a “strict liability” offence. This means that if the first two stages have occurred as outlined above, then the corporate crime of failing to prevent the facilitation of Tax Evasion will automatically assume to have been committed. It is up to the senior management of the business to put a defence across to disprove the allegation. The defence prescribed in law is to have “reasonable prevention procedures” in place.

In order to determine what are “reasonable” procedures it is first necessary to undertake a risk assessment. Based on the level of risk discovered the appropriate procedures can then be planned.

It 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. Senior Management is no longer protected from prosecution.

CFA compliance is an ongoing process, so we recommend that you speak to your legal advisors to ensure that you have reasonable prevention procedures in place.

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