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The U.K.’s Criminal Finances Act 2017
The U.K. Criminal Finances Act (“CFA”) received Royal Assent on 27 April 2017. The CFA contains two new criminal offences aimed at corporates – the failure to prevent the facilitation of U.K. tax evasion, and the failure to prevent the facilitation of foreign tax evasion – it is expected that these provisions will become effective later this year. Taxand UK provides an overview of the Act.
These rules now mean that the conduct of persons associated with a company i.e. its employees, customers, suppliers, contractors, agents and advisors could bring a strict liability for the company. This increases the importance of having a thorough knowledge of your business partners and having a well-developed system of risk management policies and procedures. The CFA covers all forms of incorporated entities and those entities that are found guilty will face unlimited financial penalties. An entity would need to have reasonable prevention procedures in place to act as a defence against prosecution in the event a tax evasion facilitation charge is brought against them.
The CFA introduces a new strict liability corporate offence of failing to prevent the facilitation of tax evasion. This could occur either in the UK or overseas and therefore has extraterritorial application.
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Implementation may not necessarily be a time-consuming exercise for smaller organisations (or they may not need it at all) but for larger, more global organisations with complex operations, implementation will be key and probably quite time consuming.
The first step will be for businesses to understand the law and how this impacts their business. If action is required, it needs to be immediate (given the rules are likely to be in force later in the year) and policies and procedures de-risking the business from a potential prosecution will need to be developed and implemented at the earliest opportunity.