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20 November 2017

New corporate offence of failure to prevent facilitation of tax evasion comes into force

The new corporate offence of failure to prevent the facilitation of tax evasion came into force on 30 September 2017 under Part 3 of the Criminal Finances Act 2017.

A company or partnership may be guilty of a criminal offence if it fails to prevent a person associated with it from facilitating UK or foreign tax evasion. ‘Associated person’ is defined broadly, and includes employees, workers, agents acting on behalf of the company or partnership and any person who provides services for or on behalf of that entity. The penalties for breach of this offence include unlimited fines and a criminal record, as well as brand and reputational damage and a prohibition on tendering for government contracts.

Although this is a strict liability offence, a defence is available if the employer can show that it had in place reasonable prevention procedures designed to prevent tax evasion facilitation from occurring, or that it was not reasonable in the circumstances to have any prevention procedures in place. In order to be able to rely on this defence, employers should therefore be undertaking risk assessments, implementing policies covering anti-facilitation of tax evasion and ensuring that employment and consultancy agreements contain appropriate preventative clauses.

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