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Criminal Finances Act

Part 3 of the Criminal Finances Act 2017 (CFA) introduced two strict liability corporate offences for failure to prevent tax evasion.

The rules took effect on 30 September 2017 and carry the risk of an unlimited fine and significant reputational damage.

Before the CFA, if an individual evaded tax and was facilitated by the advice or actions of those in a corporation, although the individual and any individuals directly facilitating would have committed a crime, the corporate entity itself would not necessarily be liable.

The CFA created two new offences so a corporation may now be prosecuted for failing to prevent the facilitation of:

1 UK tax evasion

2 Foreign tax evasion – covering the evasion of foreign taxes where there is some nexus with the UK (such as a UK-based office), and where there is dual criminality (the evasion would be regarded as criminal in both jurisdictions).

There are no thresholds and the new offences apply to companies and partnerships of all sizes, including incorporated charities.

What does this mean?

Companies and partnerships must be able to demonstrate that they have taken reasonable measures to prevent the facilitation of tax evasion by its associated persons. Unless firms can show that they had reasonable procedures in place, or evidence why it was unnecessary for them to have done so, they may end up being guilty of a criminal offence.

Who is an associated person?

An associated person is defined as a firm’s employee or agent, or someone who performs services for or on behalf of the business. This may include:

  • Suppliers (goods and services)
  • Contractors
  • Sub-contractors
  • Distributors
  • Subsidiaries
  • Joint ventures
  • Related entities
  • Other business partners

HMRC’s six guiding principles

1 Risk assessment

Identify the nature and extent of your exposure to the risk of facilitating tax evasion and understand ‘associated persons’ in context.

2 Proportionality of risk-based procedures

Using the findings of any risk assessment, implement proportionate risk-based prevention procedures and responses.

3 Top-level commitment

Demonstrate an effective commitment from senior management.

4 Due diligence

Have effective due diligence of the customer base to ensure customer compliance with UK and foreign tax legislation.

5 Communication and training

Have an effective training and communications strategy.

6 Monitoring and review

Have an effective compliance function that includes monitoring to ensure ongoing statutory defence

How we can help you

Our dedicated tax risk management team can help your business comply with all of HMRC’s guiding principles and align with any HMRC Business Risk Review. Since the introduction of the CFA in 2017, we have supported many businesses across a range of sectors to achieve proportionate and robust compliance that is tailored to their needs.

We can:

  • carry out a detailed risk assessment review - including mapping out your associated persons and preparing a traffic light report highlighting and prioritising key risk areas
  • review existing policies and assist with the implementation of new controls
  • provide training to senior management and employees by way of a face-to-face meeting or webinar.


Lee Holloway

+44 (0)20 7728 2650

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