Another new corporate criminal offence?

In the summer, the Government published four Consultation documents about tackling offshore tax evasion.  Probably the most interesting one for readers of this Blog proposes a new corporate criminal offence of failure to prevent the facilitation of evasion.  Corporations would be criminally responsible where they fail to take reasonable steps to prevent their agents from criminally facilitating tax evasion. Essentially, it increases compliance for those organisations that could be in scope.

So what type of failure would be a criminal offence?

The offence is committed through an ‘agent’ and this could mean any person who acts on behalf of the organisation. For example, an employee or an approved intermediary. An example: an individual is introduced to a Swiss adviser to create a tax efficient structure for investment into UK property. The Swiss adviser is an approved intermediary of a UK high street bank. The Swiss adviser helps the individual evade tax.  If the high street bank has not taken reasonable steps to prevent the Swiss adviser from facilitating the tax evasion, the bank could be guilty of the new offence.

A “due diligence” defence

There will be however a reasonable steps or “due diligence” defence to the offence.  In our example: the following would all be relevant:

• bank’s compliance with any applicable published guidance
• its contractual terms for its staff
• the training it provides
• any steps taken to monitor and ensure compliance

Credit may be given where a corporation’s procedures identify an offence and the corporation reports it to the relevant authorities. This may be a situation in which a Deferred Prosecution Agreement may be more appropriate than a criminal conviction.

Sounds a bit like section 7 of the Bribery Act

Yes. The Consultation notes that the difficulty of holding commercial organisations to account for the criminal acts or omissions of their agents has been successfully addressed in the area of bribery.  The introduction of s7 Bribery Act 2010 made it a criminal offence for a commercial organisation to fail to prevent bribery by a person associated with the commercial organisation. It also incentivises companies to put into place suitable procedures to avoid liability. Section 7 is described as offering “the best model”.

More targeting of banks?

In fact the Government is not targeting just banks in this new offence. Law firms and accountancy firms are other examples of organisations in scope. “Corporation” is given a broad meaning.

Geographical reach of the new offence

The new offence will apply as broadly as possible to catch situations where agents are operating in the UK or overseas to facilitate evasion of UK tax.  The Government appears to be thinking of extending the offence to evasion of non-UK tax where evasion is a crime in the foreign jurisdiction.  This mirrors the approach to jurisdiction adopted by the inchoate offences created by the Serious Crime Act 2007. The Consultation document provides an example of how this will work.

When might the new offence come into force?

HMRC anticipates that the new offence will be introduced in advance of information beginning to flow under international tax transparency agreements in 2016.

What now?

The closing date for comments is 8 October 2015.  Some organisations in scope may not prioritise responding to the Consultation, but may wish to seek advice about what kinds of procedures they would be expected to have in place before the new offence comes into force.