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CIOT examines new corporate offence proposals

Newsletter issue - September 2016

The Chartered Institute of Taxation (CIOT) has recently expressed its concerns that the new corporate offence of failure to prevent the criminal facilitation of tax evasion may lead to a string of prosecutions in relatively small cases where civil penalties can already provide enough punishment.

The Institute set out its concerns in its response to a HMRC consultation on the new corporate criminal offence, which aims to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf.

It is still HMRC's intention to keep to their original implementation timetable so that the legislation will be introduced to Parliament in the autumn with Royal Assent expected by early 2017. Given the uncertainty that the EU Referendum decision is causing (and will continue to cause for some time) to business, the CIOT has asked HMRC to consider delaying implementation of this measure.

The three stages of the new offence are:

• Stage 1: criminal tax evasion by a taxpayer (either an individual or an entity) under existing law. There has to be 'mens rea' so, for now, it will not include the new strict liability offence in Finance Bill 2016.
• Stage 2: criminal facilitation of this offence by a person acting on behalf of the corporation as defined by the Accessories and Abettors Act 1861. The actions of the corporation's representative have to be deliberate. There are no changes being made to the existing law on criminal liability.
• Stage 3: the corporation failed to take reasonable steps to prevent those who acted on its behalf from committing the criminal act at stage 2. This part of the offence is a strict liability offence. It is a defense for the corporation to prove (on the balance of probabilities) that, when the UK tax evasion facilitation offence was committed:

(a) it had in place such prevention procedures as it was reasonable in all the circumstances to expect it to have in place, or

(b) that in all the circumstances, it was not reasonable to expect it to have any prevention procedures in place.

The Institute's consultation response report can be found here.