Analysing the Criminal Finances Act 2017

Published on 10th May 2018

The Criminal Finances Act 2017 came into effect on 30 September 2017, making companies and partnerships criminally liable for failing to prevent their employees or associates from facilitating tax evasion. Here, we provide a brief overview of the new Act.

Understanding the Act

The Criminal Finances Act 2017 introduced two new criminal offences for failing to prevent the facilitation of tax evasion. The new offences are committed where a company or partnership (excluding sole traders) fails to prevent their associated persons from criminally facilitating tax evasion. The new Act makes it easier to prosecute those companies which do not comply with the regulations. The penalties for non-compliance can be severe, with unlimited fines, ancillary orders and MRC investigations just a few of them.

The three stages to the offence

Under the Act, there are three stages to the offence of criminal facilitation of tax evasion:

Stage one: A criminal act of tax evasion is committed by a taxpayer (whether they are a legal entity or an individual).

Stage two: An employee or agent of the company in question has criminally facilitated tax evasion.

Stage three: The company in question has failed to implement adequate measures to prevent their employee from criminally facilitating tax evasion. If stages one and two are met, then the company is deemed to have committed the new offence. From there it will need to demonstrate that it has implemented reasonable prevention procedures.

How can I protect my company?

The government has outlined six ‘guiding principles’ for companies to use in designing their prevention strategies, though also encourages professional guidance and a bespoke approach. The first step is a risk assessment, which in turn informs reasonable procedures proportionate to the risk. Ensuring commitment of senior management is crucial in instilling a culture and mindset opposed to these activities. Due diligence is extremely important when taking into account the scope of “associated persons” – as these include any agents, contractors, or subcontractors working for, or on behalf of, the company. he final two steps are clear communication to all areas of the company with monitoring and review of measures.

Please note that this article is intended as guidance only – a factsheet and detailed guidance are available on the gov. uk website. Alternatively, for more information or advice please get in touch.