Corporate Criminal Offences and its application to SMEs

New Corporate Criminal Offences (CCO) legislation was introduced by the Criminal Finances Act 2017. It is anticipated that all ‘relevant bodies’ – namely companies, partnerships and LLPs – will be affected from 30 September 2017. The legislation impacts all businesses and covers all taxes.

What are the offences?

Two new offences have been created:

  1. The first applies to businesses, wherever located, in relation to the facilitation of UK tax evasion.
  2. The second applies to businesses with a UK connection in relation to the abetment of non-UK tax evasion.

Tax evasion has always been illegal but under the CCO rules, a business may be held liable where it fails to prevent ‘associated’ persons from deliberately facilitating the criminal evasion of tax. Associated persons can include employees, contractors and others who perform services for or on behalf of the business, such as suppliers, agents and intermediaries.

Application to SMEs

An SME should undertake a risk assessment of the products and services offered, as well as its internal systems and
client data. Various hallmarks of fraud should be examined, for example:

  • Are there staff members who refuse to take leave and do not allow anyone else to review their files, or become
    involved in their client relationships?
  • Do existing processes ensure that, for higher risk activity at least, a sample of files is routinely reviewed by a second pair of eyes?

The SME should then consider how existing processes and procedures may be tailored to prevent and detect
potential tax evasion facilitation. Key issues could include:

  • Demonstrating a commitment to preventing the involvement of those acting on their behalf in the criminal facilitation of all forms of tax evasion by issuing a prominent message from the leadership team;
  • Agreeing and documenting an overview of its strategy and timeframe to implement preventative policies;
  • Including terms in contracts with associated persons requiring them not to engage in facilitating tax evasion and to report any concerns immediately;
  • Providing regular training for staff on financial crime detection and prevention;
  • Having clear reporting procedures for whistle-blowing of suspected facilitation;
  • Ensuring that the pay and bonus policy/structure discourages pursuing profit to the point of condoning tax evasion;
  • Monitoring and enforcing compliance with prevention procedures;
  • Undertaking regular reviews of the effectiveness of prevention procedures and refining them where necessary.
You can find out more about the Corporate Criminal Offences legislation in our whitepaper.

The above is based on draft government guidance but we will continue to update you as and when further information is released. Please do not hesitate to contact us on 01903 234094 if you have any queries or concerns.