HMRC launches consultation on new tax evasion offence
The Revenue has published its consultation on proposing to make companies criminally liable for failing to prevent their staff facilitating tax evasion
The offence was first proposed in the 2015 Budget and was expected to come into effect in 2020. The Panama papers leak and subsequent scandal has put significant pressure on the government and David Cameron to get tough on aggressive tax avoidance and evasion.
The new offence aims to address a number of shortfalls in existing law, said HMRC in its consultation document published yesterday.
Currently, attributing criminal liability to a corporation normally requires prosecutors to show that the most senior members of the corporation were involved in and aware of the illegal activity. The proposed offence will take into account the lower levels of an organisation where a lot of decisions are made.
The existing law, HMRC said, can act as an incentive for the most senior members of a corporation to turn a blind eye to the criminal acts of its representatives to help protect the company. It also disincentivises internal reporting of suspected illegal activity.
The planned offence will cover both UK and overseas tax evasion. Under it, businesses will be required to show that they took “reasonable steps” and precautions to ensure that staff members did not engage in, facilitate or aid any tax evasion.
Andrew Smith, a partner at law firm Corker Binning, said, “Given HMRC’s stretched budget, and to improve HMRC’s prosecutorial record, it is no doubt politically expedient to criminalise the easier targets – the corporates which fail, even inadvertently, to prevent the facilitation of tax evasion, and which may have little appetite for contested criminal litigation.
“A cynic would say that business is being asked to bear the burden of HMRC’s inability to prosecute the true tax evaders. However, that perspective ignores the raft of other measures, both domestic and international, that are being planned so as to bolster the fight against tax evasion, not least the introduction of the Common Reporting Standard in 2017,” he added.