Businesses to be liable for failure to prevent tax evasion
Whilst it is nothing new that tax evasion is illegal, the UK Parliament has gone one step further by introducing additional legislation to criminalise failure to prevent tax evasion.
Under this new legislation, companies can find themselves liable for failing to prevent the facilitation of tax evasion. In other words, professional advisors who help their clients to evade tax could face fines of up to £3,000. What's more, HM Revenue & Customs (HMRC) will not be shy in naming and shaming those companies involved.
The bill should come as no surprise. During her leadership campaign to pursue companies over tax avoidance last year, Prime Minister Theresa May, stated: “It doesn’t matter to me whether you’re Amazon, Google or Starbucks, you have a duty to put something back, you have a debt to fellow citizens and you have a responsibility to pay your taxes.”
The UK is one of the first countries in the world to introduce this power. The Bill brings with it two new criminal offences which apply to all organisations, regardless of whether or not they are based in the UK. These are:
- Failure to prevent facilitation of UK tax evasion; and
- Failure to prevent facilitation of overseas tax evasion.
This means that a company will be held liable if one of its employees or contractors is proven to have aided and abetted a person in evading tax, even if the company didn't have any knowledge of the associated persons facilitating tax evasion.
These offences bear resemblance to the corporate offence under the Bribery Act in that they are extraterritorial - they cover conduct that takes place anywhere in the world.
According to GOV.UK, HMRC has secured over £130 billion in additional compliance revenues as a result of actions to tackle tax evasion, avoidance and non-compliance, since 2010.