Two new corporate offences relating to tax evasion were introduced on 30 September 2017. The offences cover tax evasion in both the UK and overseas and apply to companies, partnerships and LLPs.
The new offences essentially mirror the existing ones relating to acts of bribery. So a company is liable for the tax evading actions of its ‘associated persons’, which includes employees and agents.
The only defence available to a company that may be guilty of a tax evasion offence is to demonstrate that it had reasonable prevention procedures in place. This is very similar to the adequate procedures defence to the bribery offences. You can read about the requirements under the Bribery Act here.
If found guilty of a tax evasion offence, a company could face an unlimited fine, a confiscation order or a serious crime prevention order. It could also be banned from entering into public procurement contracts.
To be liable for one of the new offences, a three stage process must be satisfied.
- Stage one: there is criminal tax evasion by a legal entity or an individual;
- Stage two: there is criminal facilitation of the tax evasion by a person associated with the company; and
- Stage three: the company failed to prevent the associated person from acting in that way by not having reasonable prevention procedures in place.
Stage one: tax evasion
There are two different types of tax evasion:
- a UK tax evasion offence of cheating the public revenue or being knowingly concerned in the fraudulent evasion of any UK tax; and
- a foreign tax evasion offence relating to conduct which is an offence under the law of a foreign country, which relates to a breach of duty regarding a tax imposed under that foreign law and which would be regarded as a UK tax evasion offence if the offence were committed in the UK.