Nowhere To Hide For Organisations With Policies And Procedures Not Fit For Purpose

As HMRC ups the ante on failure to prevent the facilitation of tax evasion, specialists at Irwin Mitchell say organisations must now have procedures in place demonstrating they take their responsibilities seriously.

The warning comes after HMRC published a Freedom of Information (FIO) release on 10 February 2020, outlining the number of live Corporate Criminal Offences (CCO) investigations, a move which it will repeat biannually.

This release highlights the increasingly strong stance being taken to enforce the offence of failure to prevent the facilitation of tax evasion, introduced by Part 3 of the Criminal Finances Act 2017 (CFA). The introduction of the CFA means that relevant bodies are criminally liable where they fail to prevent those who act for, or on their behalf from, criminally facilitating tax evasion.

As at 31 December 2019, HMRC has nine live CCO investigations, with a further 21 opportunities under review. These span 10 different business sectors, including financial services, oils, construction, labour provision and software development.

HMRC also does not discriminate when it comes to the size of an organisation, with the investigations covering all HMRC customer groups, from small business through to some of the UK’s largest organisations.

HMRC state that: “The number and spread of investigations clearly demonstrate that HMRC is actively enforcing the legislation across all tax and duty regimes and across organisations of all shapes and sizes.”

There is now nowhere to hide for organisations whose policies and procedures are not fit for purpose. With potentially unlimited fines for those found guilty of the offence, organisations must take their responsibilities seriously and put in place reasonable procedures to stop the facilitation of tax evasion.

What is reasonable to an organisation is dependent on a number of factors that contribute to risk, including sector and jurisdiction. These reasonable procedures will then become the basis of a defence against an offence.

The creation and maintenance of comprehensive policies and procedures, built on a strong anti-tax evasion culture is imperative and organisations of all sizes must be able to demonstrate this.

It is clear HMRC is upping the ante in relation to the facilitation of tax evasion, and organisations must ensure policies and procedures are not lagging, if they exist at present at all.

Policies and procedures should be living documents, constantly monitored and maintained to ensure compliance and the best possible chance that they are considered to be reasonable should anything go wrong.

The Regulatory Team at Irwin Mitchell provide advice and assistance in relation to formulating and reviewing these reasonable procedures.

The government guidance provides more detailed information about the legislation, including ‘The 6 Guiding Principles’, which are designed to inform HMRC as to whether the policies and procedures put in place by relevant bodies can be considered to be reasonable.

Dan Brunt, a specialist on the Regulatory Team at Irwin Mitchell said: “It seems oxymoronic for a court to find your procedures to be reasonable if tax evasion still occurs.

“There is an acceptance that policies and procedures cannot be 100% watertight, but it is key that your organisation strives to be as close to that as possible. You therefore need to be proactive and ensure that a robust compliance programme is in place, and importantly, that this is then being followed through and regularly reviewed.”