Deferred Prosecution Agreements are here to stay
In a recent interview, the Director of the Serious Fraud Office (SFO), Lisa Osofsky, has given her support to the continued use of Deferred Prosecution Agreements (DPAs) as an effective tool in the fight against economic crime.
DPAs, which are essentially American-style corporate plea bargains, came into use in the UK in 2015. They allow companies who admit wrongdoing to reach an agreement with the prosecutor, under the supervision of a judge. That agreement allows the prosecution to be suspended for a defined period provided the organisation meets certain specified conditions, which usually include fines and monitoring, avoiding the additional damage a conviction would likely bring.
DPAs have come under criticism since their introduction in the UK as some say they enable companies to engage in and admit criminal conduct yet avoid prosecution. Also there have been questions asked as to how effective a tool DPAs are to incentivise companies to self-report, as the UK lacks the strong deterrents to economic crime available in the US.
Osofsky claims that, since their introduction, DPAs have been effective in ensuring companies ‘clean up’ their act. For example, in 2017, two major companies, Tesco and Rolls-Royce, agreed DPAs with the SFO, paying £129 million and £500 million respectively.
However, since Osofsky took over at the SFO in September 2018 a re-trial of former Tesco directors has collapsed and an investigation into individuals linked to the Rolls-Royce case was closed. Despite this she claims that even if there is not enough evidence to prosecute individuals over the misconduct outlined in DPAs, they still serve an important purpose: ‘Corporates (are run) by individuals. But how do you reprimand, discipline, punish bad corporate behavior…? I see (cases against companies and individuals) as two very different things and I think the role of the DPA is to make sure that the company engages with prosecutors, comes forward and cleans up its act.’
Osofsky declined to comment on whether some of the cases she inherited will be closed in the near future. These include investigations into, among others, Rio Tinto, Airbus, British American Tobacco, Tata Steel and ENRC. She did however say that for cases to be impactful they need not involve large companies and that any company successfully prosecuted is progress.
JHA specialises in investigations, litigation and dispute resolution. We bring together leading barristers, solicitors and forensic accountants, to support clients at every stage and have deep experience of working with regulators including the SFO, FCA and HMRC.
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Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)
Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).
In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1
HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.
This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.
It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.
This article was first published with ThoughtLeaders4 Private Client Magazine
Case note: Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners [2022] UKFTT 00224 (TC)
As HMRC continue to apply the Kittel principle to increasing numbers of industries and businesses, taxpayers need to be vigilant about evidential requirements that HMRC must fulfil in order to discharge their burden of proof. Read JHA’s latest insight into the First-tier Tribunal’s decision in Lynton Exports (Alsager) Ltd v Revenue and Customs Commissioners [2022] UKFTT 00224 (TC).
If you require any further information about the Kittel, Mecsek, and Ablessio principles, or any other allegations by HMRC of fraud or fraudulent abuse, please contact Iain MacWhannell (imw@jha.com).
