Reviewing the new Criminal Finances Act 2017

The Criminal Finances Act 2017 came into effect on 30 September 2017.

The Criminal Finances Act 2017 came into effect on 30 September 2017, making companies and partnerships criminally liable for failing to prevent their employees from facilitating tax evasion. Here, we outline the key points to consider to help ensure that your business avoids the criminal facilitation of tax evasion.

How does it work?

Under the Criminal Finances Act (CFA), relevant bodies, such as companies and partnerships, will be criminally liable if they do not stop their employees or those who perform services on their behalf from facilitating tax evasion.

Under the CFA, two new offences have been introduced. Whilst offshore tax evasion is the 'driving force' behind the creation of these offences, the regulations apply to the facilitation of tax evasion committed onshore, as well as offshore, and apply to all taxes.

Domestic fraud offence
The domestic fraud offence makes companies, partnerships and relevant bodies criminally liable for failing to implement reasonable prevention processes to stop their employees or agents from criminally facilitating tax evasion.
Overseas fraud offence
The overseas offence criminalises corporations trading in the UK who fail to put into place reasonable processes to prevent their employees from facilitating tax evasion in another jurisdiction.

Only 'relevant bodies' and legal entities can commit the new offences under the CFA.

Stages to the offence

There are three stages to the offence, as outlined below:

Stage one
A criminal act of tax evasion is committed by a taxpayer (whether they are an individual or a legal entity).
Stage two
An individual associated with the company or partnership has criminally facilitated the tax evasion. Such individuals could be employees of the organisation, an agent or other associated person who acts on behalf of the company in question.
Stage three
The company failed to implement reasonable measures to prevent their employees, agents or associated persons from criminally facilitating tax evasion. 

Where stages one and two have been committed, the company in question is deemed to have committed the third offence. The onus is on the company to demonstrate that it has implemented reasonable prevention procedures within the business to protect against the facilitation of tax evasion. If the company can prove it implemented stringent procedures, prosecution will be 'unlikely'.   

Protecting your company

To help firms protect their business, the government has outlined six 'guiding principles' for companies to consider:

Risk assessment
Companies are advised to assess the nature and extent to which they are exposed to the risk of their employees criminally facilitating tax evasion. 
Proportionality of risk-based prevention procedures
The reasonable procedures implemented by a company must take into account the nature, scale and complexity of its activities.
Top level commitment
The senior management of the company in question must be committed to preventing their employees and associates from facilitating tax evasion.
Due diligence
To mitigate potential risks, due diligence procedures must be applied in regard to persons who perform or intend to perform services on behalf of a company.
Thorough, detailed training must be provided to employees of a company, and prevention policies must be properly understood, well-communicated and implemented throughout the workforce.
Monitoring and review
Relevant bodies must perform regular reviews of their preventative measures, and amend these if necessary.

Penalties for non-compliance with the Act

Companies who fail to prevent their employees or agents from criminally facilitating tax evasion will be subject to unlimited fines and ancillary orders. If convicted, companies may also be prevented from being awarded public contracts.  

Getting to grips with the new Act is vital and written policies and procedures are strongly advised. We can help you to implement effective procedures to help safeguard against the facilitation of tax evasion - get in touch with us to find out more.


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