Criminal Finances Act

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As the Criminal Finance Act beds in, we thought it was worth just pausing to take a breath and see how it affects us and what we are seeing in practice. The general view is very much along the lines of an awareness that there is uncertainty as to how the new legislation will be enforced due to its newness.

The new legislation was effective with effect from 30 September 2017 and can be found at Part 3 Criminal Finance Act 2017. You can find the legislation in full here.

To paraphrase and simplify the legislation, the failure to prevent facilitation of tax evasion offence is founded on tax evasion crimes such as cheating HMRC or other fraudulent evasion offences, i.e. the most serious tax offences there are. Strict liability offences and matters dealt with on a civil basis (such as normal enquiry-related matters) are excluded.

Dishonest intent for the underlying offence as well as dishonest facilitation must be proved. Accordingly, it could be said that the bar is set very high, and the new legislation is likely to be reserved for the most serious cases. According to the explanatory notes accompanying the bill, aggressive avoidance falling short of evasion or inadvertent or negligent facilitation is not criminalised.

Absent of fraudulent tax evasion or cheating the public purse there should be no possibility of exposure under the Criminal Finance Act 2017.

The legislation provides get outs where either businesses have due diligence procedures in place to govern issues they can control or if it is not reasonable to expect them to have procedures in place. We would recommend that all businesses should have risk assessment measures in place, that are documented and auditable, to ensure compliance with the Act. The level and detail of those procedures will vary from business to business dependent upon size and complexity. We can provide advice if needed.

In practice, many businesses are taking the view that the compliance measures they have in place in respect of the Bribery Act are sufficient to give comfort under the Criminal Finance Act, but we would recommend that it is clear within internal documentation that there are references to specific Criminal Finance Act checks and that audit trail records are available.

As with all new legislation it will be interesting to see how it beds in. Given the vagueness we expect there to be challenge from HMRC, although this is likely to be restricted to serious cases. Please do contact us if you require further advice or have any concerns.