HMRC launches first Criminal Investigations under the new ‘Failure to Prevent’ Offence
A recent freedom of information request has revealed that HMRC is currently investigating several cases under the corporate criminal offence of failure to prevent the facilitation of UK tax evasion.
This corporate criminal offence, which was introduced in the Criminal Finances Act (CFA) 2017, places a positive obligation on companies to implement procedures to prevent the facilitation of UK tax evasion. While this offence applies to all companies, it is particularly aimed at banks, accountants and law firms, who are often regarded as unwitting ‘enablers’ of this type of crime.
Under section 45(1) of the CFA a company ‘is guilty of an offence if a person commits a UK tax evasion facilitation offence when acting in the capacity of a person associated with (the company)’. A company can defend itself if it can show the tax evasion facilitation offence was committed despite the company having had in place such prevention procedures as it was reasonable in all the circumstances to expect the company to have in place; or it was not reasonable in all the circumstances to expect the company to have any prevention procedures in place. The ‘failure to prevent’ offence can be punished by unlimited fines and orders for confiscation of assets.
The criminal investigations reported by HMRC show that some action is now being taken regarding prosecuting companies for financial crime, something the UK has been comparatively ineffective at in the past and is under increasing pressure to step up, as shown in the recent report by the Treasury Committee on anti-money laundering and anti-financial crime regime in the UK. The launching of these investigations by HMRC potentially marks a first step in the direction of pursuing effective prosecutions in this area and shaping the landscape of corporate liability in the UK in general.
It is not known how long these cases will take to investigate and it is likely that it will be many more months until we see the first prosecution in the UK for this offence. However, it is likely that the number of investigations brought under this legislation will increase over the next few years and companies should be prepared.
As announced in July of last year, the 2020 Budget introduces a new deferred payment plan option for Corporation Tax charged on profits or gains arising from certain transactions between UK companies and EEA companies of the same group of companies.
Reversal of Inverclyde
The 2020 Budget announced provisions to reverse last year’s FTT decision in Inverclyde. In that case, HMRC denied the appellant LLPs’ claims for Business Property Renovation Allowance on the basis that the LLPs did not carry on a business with a view to a profit.
HMRC nudge letters
HMRC continues to fight the good fight in its quest to cut down on tax avoidance and have recently been issuing further “nudge” letters to taxpayers who may have an income source or assets producing gains overseas and consequently an undisclosed outstanding UK tax liability.
ExxonMobil: FTT Decision Released
The FTT decision in Esso Exploration and Production UK Limited and others v HMRC, which relates to pre-2006 claims for Cross Border Group Relief, has now been released.