Criminal Finances Act 2017 – The Law

What is the Criminal Finances Act 2017?

The Criminal Finances Act 2017 enacts two new corporate criminal offences of “failure to prevent” the facilitation of tax evasion, either in the UK or abroad, by a person associated with a company (or LLP) and will make companies criminally liable for failing to prevent the facilitation of tax evasion offences.

It is a piece of legislation that impacts on the recruitment sector as it could make companies criminally liable if they fail to prevent tax evasion by either a member of their staff or an external agent, even where the business was not involved in the act, or directors and officers were unaware of it.

What is the facilitation of tax evasion?

Tax Evasion: means an offence of cheating the public revenue or fraudulently evading UK tax, and is a criminal offence. The offence requires an element of fraud, which means there must be deliberate action, or omission with dishonest intent.

Foreign Tax Evasion: means evading tax in a foreign country, provided that the conduct is an offence in that country and would be a criminal offence if committed in the UK. As with tax evasion, the element of fraud means there must be deliberate action, or omission with dishonest intent.

Tax Evasion Facilitation: means being knowingly concerned in, or taking steps with a view to, the fraudulent evasion of tax (whether UK tax or tax in a foreign country) by another person, or aiding, abetting, counselling or procuring the commission of that offence. Tax evasion facilitation is a criminal offence, where it is done deliberately and dishonestly.

Tax: means all forms of UK taxation, including but not limited to corporation tax, income tax, value added tax, stamp duty, stamp duty land tax, national insurance contributions (and their equivalents in any non-UK jurisdiction) and includes duty and any other form of taxation (however described).

Offences and reasonable prevention

Companies are to account for the actions of their employees or associates and this can be broadly interpreted to include service providers and agents where they (acting as an accomplice) criminally facilitates a person (which can include contractors and suppliers) to commit a UK or foreign tax evasion offence.

Companies can be liable even if the directors are not involved or aware. However, there needs to be criminal intention and fraudulent tax evasion is required; there must be a dishonest intention not to declare tax.

The existence of reasonable prevention procedures will be the standard defence. The company must be able to prove that:

  • it had in place such “prevention procedures”, meaning procedures designed to prevent associated persons from facilitating tax evasion offences, as it was reasonable in all the circumstances to expect it to have in place; or
  • in all the circumstances, it was not reasonable to expect it to have any prevention procedures in place.

Whitehall Resources’ Anti-Tax Evasion Policy

In our day to day business, such as reviewing IR35 private sector or public sector Off Payroll decisions, running contractors through compliant umbrella companies or engaging with compliant Personal Service Companies, there is a low risk.

Nevertheless, we have adopted a statement of our corporate value on anti-facilitation of tax evasion. It is our policy to conduct all of our business dealings in an honest and ethical manner.

We request all our employees and all who have or seek to have a business relationship with us to familiarise themselves with our anti-tax evasion value statement and to act, at all times, in a way which is consistent with our anti-tax evasion value statement.

Anti-tax evasion value statement

We have a zero-tolerance approach to all forms of tax evasion, whether under UK law or under the law of any foreign country.

Employees and associates must not undertake any transactions which:

  • cause us to commit a tax evasion offence; or
  • facilitate a tax evasion offence by a third party.

We are committed to acting professionally, fairly and with integrity in all our business dealings and relationships wherever we operate and implementing and enforcing effective systems to counter tax evasion facilitation.

At all times, business should be conducted in a manner such that the opportunity for, and incidence of, tax evasion is prevented.

Who must comply with this policy?

This policy applies to all persons working for us, including employees at all levels, directors and officers and associates.

Who is responsible for this policy?

Our Directors have overall responsibility for ensuring that this policy complies with our legal obligations, and our employees and associates comply with it. This policy may be varied or withdrawn at any time, in our absolute discretion. Employees in leadership positions are responsible for ensuring those reporting to them understand and comply with this policy.

What should employees and associates do/not do

Employees and associates must at all times adhere to our anti-tax evasion value statement and must ensure that they read, understand and comply with this policy.

It is not acceptable for employees and/or associates to:

  • Engage in any form of facilitating Tax Evasion or Foreign Tax Evasion;
  • Aid, abet, counsel or procure the commission of a Tax Evasion offence or Foreign Tax Evasion offence by another person;
  • Fail to promptly report any request or demand from any third party to facilitate the fraudulent Evasion of Tax by another person, in accordance with this policy; or
  • Engage in any other activity that might lead to a breach of this policy; or
  • Threaten or retaliate against another individual who has refused to commit a Tax Evasion offence or a Foreign Tax Evasion offence or who has raised concerns under this policy;
  • An offence under the law of any part of the UK consisting of being knowingly concerned in, or taking steps with a view to, the fraudulent evasion of tax.

Prevention through vigilance

There is not an exhaustive list of Tax Evasion opportunities. At a more general level, the best defence against Tax Evasion and facilitation of Tax Evasion remains the vigilance of our employees and associates and the adoption of a common-sense approach:

  • Is there anything unusual about the manner in which an associate of ours is conducting their relationship with us or a third party?
  • Is there anything unusual about the third party’s or associate’s conduct or behaviour?
  • Are there unusual payment methods?

How to raise a concern

Our employees have a responsibility to take reasonable action to prevent causing us harm and report any unusual activity. We hold our employees accountable for their actions and omissions and any actions that breach the Criminal Finances Act and the tax laws of wherever we operate will not be tolerated.