New criminal offence of failing to prevent tax evasion risks confusion and added burdens for businesses

The Chartered Institute of Taxation (CIOT) has warned that legislation in today’s Queen’s Speech must have effective guidance so that companies know when they are taking adequate measures to guard against rogue members of staff facilitating tax evasion or money laundering.

The Criminal Finances Bill will make it an offence for companies to fail to stop their staff facilitating tax evasion. The Prime Minister said last week at the Anti-Corruption Summit that the Government would be consulting on extending the offence to cover money laundering, too.

John Cullinane, CIOT Tax Policy Director, said:

“We are concerned about this proposal because we believe there is enough law in relation to corporations in this area already. As with individuals facilitating offshore evasion, it is very problematic to hold a company responsible for an individual’s actions.

“If the Government believes that criminal sanctions need to be strengthened in this area then the new offence must not only be phased in gradually to allow businesses time to familiarise themselves with the regime and implement appropriate procedures so that they can comply with it, but it must also be subject to a clear defence of reasonable care being available.  The key to this whole issue is clearly drafted legislation, supported by guidance containing practical examples, so that companies understand the practical steps expected of them which will actually help combat tax evasion and money laundering – as well as enabling the compliant effectively to protest their innocence.

“There have been a lot of proposals for change in this area recently and the Government must be careful not to place unreasonable or unrealistic and expensive compliance burdens on business.”

Notes for editors
1. The CIOT’s submission to HMRC on Tackling Offshore Tax Evasion: a new corporate criminal offence of failure to prevent the facilitation of evasion, can be viewed here.

2. The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.