Corporate Criminal Offences and self-reporting

08 March 2018

Following the enactment of the Criminal Finances Act on 30th September 2017 (CFA), HMRC launched a CCO self-reporting website, calling upon company representatives to self report the facilitation of tax evasion contrary to the Corporate Criminal Offences (CCOs) (s45 and s46 CFA 2017).

Corporates can defend the failure to prevent the facilitation of tax evasion if they can demonstrate that they have “reasonable prevention procedures.”  HMRC CCO Guidance states that:

“In order to encourage relevant bodies to disclose wrongdoing, timely self-reporting will be viewed as an indicator that a relevant body has reasonable procedures in place.”

Prompt self-reporting does not preclude an organisation from prosecution but could be taken into account by prosecutors when making decisions about prosecution and any associated penalties.  For example, HMRC may take the view that Deferred Prosecution Agreements (DPA) may only be available to Corporates who proactively self-report instances of wrongdoing.

In this blog entry we summarise the process to follow when making a CCO self-report to HMRC.

How to self report to HMRC?

HMRC has created dedicated a self-reporting email address (corporate.self-reporting@hmrc.gsi.gov.uk) and it is encouraging corporates to use this address in order to self report any issues arising under the CCO. However there is no requirement to self-report in this way and any corporate may wish to seek legal advice prior to making any self report. In many cases it may be more appropriate for organisations to first raise any issues with their HMRC Customer Compliance Manager or through other means as opposed to by a “postbox” email address.

In addition, firms operating in the regulated sector may have separate obligations including under the Proceeds of Crime Act 2002 to submit a Suspicious Activity Report (SAR).  In such circumstances the SAR must be submitted to the National Crime Agency prior to self-reporting to HMRC.

What information should be reported to HMRC?

Organisations can provide as much information to HMRC as they feel appropriate. The content and manner of self reporting should be carefully considered in each case. In addition to information around the factual circumstances of the report, HMRC suggests including details of the firm’s “reasonable prevention procedures” including:

(i)  the date of the latest version of documented procedures and whether HMRC could receive a copy (or if not, why the organisation does not have such procedures); and

(ii) whether these procedures cover HMRC’s key prevention principles (risk assessment, proportionality, top level commitment, due diligence, communication, training, monitoring and review).

Organisations should bear in mind that the quality of any self-report is likely to be a material consideration for the granting and approval of a DPA. In the event that the self-report is not full and frank, you can expect that HMRC and/or the SFO to take a dim view of the organisation in question and damage your credibility with the regulator.

What next?

Care should be taken not to “tip off” others of the fact or content of the self-report (s333A Proceeds of Crime Act 2002 (POCA)).  Non-regulated firms must ensure that they do not “prejudice an investigation,” contrary to s342 POCA.

HMRC have stated that following receipt of a self-report they may not contact the reporter for some time (or at all).  Alternatively the information provided in the self-report may be used as evidence in a prosecution or other court proceedings.

Conclusion

Firms should ensure that their “reasonable prevention procedures” are clearly documented, up to date and accessible so that in the event facilitation of tax evasion is identified they can submit an accurate and timely self-report to HMRC. In addition, prior to any self report organisation should ensure that they seek legal advice as the form and content of any report to the authorities.

 

Keily Blair

Keily Blair | Director, Solicitor
LinkedIn Profile | Email | +44 (0)20 7213 8845

Chris Cartmell

Chris Cartmell | Senior Manager, Solicitor
LinkedIn Profile | Email | +44(0)20 7212 8849

Kate Langley

Kate Langley | Manager, Solicitor
LinkedIn Profile | Email | +44(0)20 7804 3983

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