Self-reporting: Corporate Criminal Facilitation of Tax Evasion

02 April 2019

In a recent survey carried out by Ipsos Mori, only a quarter of businesses questioned had heard of the Criminal Finances Act 2017. Perhaps even more concerning, is that only 20% of those who were aware had gone on to make changes to their businesses as a result.

What is the Criminal Finances Act 2017 (CFA 2017)?
Under the CFA 2017, a company can be prosecuted for failing to prevent the facilitation of tax evasion committed by persons associated with the company (“the Corporate Criminal Offences (CCO)”). In other words, a company could be prosecuted even if it was unaware that someone acting on its behalf was criminally facilitating the tax evasion of a third party.
In such circumstances, unless it can be shown that “reasonable prevention procedures” are in place, a company will be found guilty and face potentially unlimited fines and ancillary orders along with significant reputational damage.


Overview of the Corporate Criminal Offences

Ccoblog1

What is self-reporting?
Self-reporting is the proactive process of submitting a report to HMRC on behalf of a company that has suspicions around tax evasion and/or believes it may have facilitated tax evasion.

Such issues may be initially identified via internal whistleblowing and/or escalated to the company’s Compliance, Tax and/or Legal departments.

Why should you self- report?
Self-reporting can help to mitigate the potential consequences. According to HMRC guidance, self-reporting:

  1. can be viewed as an indicator of “reasonable prevention procedures” (the only available defence to the offence);
  2. will be taken into account when deciding whether to prosecute and can allow for a prosecution to be suspended under a deferred prosecution agreement; and
  3. may be reflected in any penalties that are imposed.

How can PwC help?
The approach to self-reporting should be carefully considered with a multidisciplinary team of legal as well as tax advisors. A criminal offence may be committed if HMRC are provided with false information, or if a self-report includes information that the person submitting the self-report does not honestly believe to be true. In addition, care should be taken not to “tip off” under the Proceeds of Crime Act 2002 when submitting a self-report.
The self-report can be submitted via HMRC's website or raised initially with your HMRC Customer Relationship Manager.

Conclusion

The CFA 2017 provides a strong incentive to invest in reasonable prevention procedures focused on counteracting the risks of facilitation of tax evasion.

In response to a written question to parliament on 5th February 2019, it has been confirmed that HMRC has active CCO investigations. Each of these investigations commenced after November 2018 which suggests that the transition period allowing for implementation of the CFA 2017 may now be over. It also seems likely that HMRC might seek to add the CCOs to the scope of other live investigations.


For more information contact PwC’s Regulatory Disputes Team (Legal).

Kate Langley

Kate Langley | Manager, Solicitor
Profile | Email | +44 (0)7710 037414

Nabeel Osman

Nabeel Osman | Senior Manager, Barrister
Profile | Email | +44 (0)7718 978 999

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