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UK Criminal Finances Act 2017; what it means for employers

Companies and partnerships are now liable if they play a part in preventing tax evasion if it involves a member of staff of an external agent.  This will be enforced through the UK Criminal Finances Act (CFA) which came into force on 30 September 2017.

This covers businesses all over the world if they have any sort of dealings with the UK.  For example, if part of their business operates in the UK or if money is changing hands with a registered UK company.

A prosecution could result in a conviction and unlimited penalties.

It is already an offence to evade tax but, up to this point in time, it has not been possible to assign the criminal liability to the company where it took place.

The laws and regulations associated with the CFA do cover tax related cases within both the UK and countries overseas, but only where the UK is a focus of the case, such as the involvement of UK businesses.

The important points

If a firm is made liable, the following would have occurred:

Stage one

A tax payer has avoided paying tax; this could be an individual or a company under the law that existed prior to the introduction of the CFA.

Stage two

Criminal activity has been facilitated by someone who works for the firm (made clear under the Accessories and Abettors Act 1861).

Stage three

The firm was aware of, and yet did not prevent their representative from committing the criminal activity as mentioned in stage two.

The aim of the new rules is to target behaviour which has been carried out deliberately and dishonestly. There are no new offences created for individuals, so any tax evasion under the current law will remain that way.

Defending criminal liability

If it’s possible for a business to prove that it had put the correct preventative measures in place, it could avoid being made accountable for the criminal activity. It is also possible for the business to show that the current circumstances would have made it impossible and unreasonable for the procedures to be put in place.

What can businesses do?

Busines must consider their current practices as well as their procedures to ensure that risks are reduced. They must also implement the correct procedures to enable monitoring of and provide training to all staff, regardless of their level. The Act puts the responsibility in the hands of managers, to prevent their staff (as well as any external agents and consultants) from committing tax evasion.

So, the bigger the business, the greater the risk which could mean that any criminal activity is more likely to be found out.

This Act has been brought in to combat tax evasion by individuals who work for, or are associated with, businesses. It is in the best interests of all businesses to ensure they do all they can to prevent tax evasion as they could find themselves liable for any criminal activity.

Author: Javeed Baig

Accountants Leicester

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. 

Published on 2nd October 2017
(Last updated 7th May 2021)