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.
An Assessment to Tax is never ‘stale’, but it might be out of date: HMRC v Tooth
This article briefly discusses the key points arising out of the decision of the UK Supreme Court in HMRC v Tooth  UKSC 17. The case considered (1) whether a discovery assessment could become “stale” and (2) the meaning of the phrase “deliberate inaccuracy”.
VATA 1994 s.47, Agency, Onward Supply Relief, & Double Taxation
On 12 July 2021, the First-tier Tribunal (Tax Chamber) (“FTT”) released its decision in Scanwell Logistics (UK) Limited v HMRC  UKFTT 261 (TC), rejecting the taxpayer’s claim for onward supply relief (“OSR”).
Whilst OSR is now limited, post-Brexit, to goods imported into Northern Ireland for onward supply to the EU, the FTT’s discussion of agency under section 47 of the Value Added Tax Act 1994 (“VATA”) is of broader interest.
The case serves as a reminder of the significant financial consequences that can result from errors in tax planning, as Scanwell was ultimately held liable for £5.7 million in unpaid import VAT despite the fact that the imported goods almost immediately left the UK (which, if properly planned, could have meant Scanwell was relieved from liability to import VAT).
Draft Finance Bill 2022—tax avoidance measures
Helen McGhee, senior associate at Joseph Hage Aaronson LLP, considers the draft Finance Bill 2022 clauses published on 20 July 2021 in relation to tax avoidance and recent updates to the tax avoidance regime.
Getting Closer: A Global Minimum Tax on Corporations
On 1 July 2021, US Treasury Secretary Janet Yellen announced that countries representing over 90% of global GDP had agreed to a global minimum tax on corporations (“GMCT”). The GMCT seeks to put a floor on tax competition on corporate income through the introduction of a minimum corporate tax of at least 15%. Whilst certain elements give rise to positive expectations, some caveats should be noted. Much will depend on (1) the outcome of future political negotiations and (2) the detail of the drafting at international and national levels.
The DBKAG & K (CJEU) decision: an opportunity for investment funds?
On 17 June 2021, the European Court decided the joint cases K (C-58/20) and DBKAG (C-59/20) regarding whether the supply of certain services constituted the “management of special investment funds”, benefiting from the VAT exemption enshrined in Article 135(1)(g) of Council Directive 2006/112/EC.