One in four businesses aware of corporate criminal offence for tax evasion
Just a quarter of businesses are aware of tough new corporate criminal offences relating to activity which is seen to facilitate tax evasion and only 8% have carried out training in this area
14 Mar 2019
The Criminal Finances Act 2017 introduced new offences which mean companies and partnerships can be found liable for failing to prevent the criminal facilitation of tax evasion by anyone or any organisation that is providing a service for or on their behalf. The offences, which apply to the facilitation of both onshore and offshore evasion and can affect companies and partnerships across all sectors and sizes, came into force on 30 September 2017.
A survey of senior individuals in 1,000 UK companies and partnerships conducted for HMRC by Ipsos found that only 25% of respondents had even heard of the legislation.
When prompted that changes under the Act make businesses criminally liable for failing to prevent the facilitation of tax evasion, awareness increased to 34%.
Larger businesses were more likely to be aware (58%) than medium (30%), small (26%) and micros (24%).
Financial and insurance firms had significantly higher levels of awareness (58%) than those across all other sectors (24%).
Those businesses that are aware of the changes demonstrated good knowledge of the detail of the corporate criminal offences within the Act.
Most (76%) knew that it meant businesses could be found liable if they fail to prevent the facilitation of tax evasion by anyone providing a service on their behalf, eg, employees, suppliers, subcontractors or agents and of the potential consequences of a successful prosecution such as unlimited fines, loss of regulatory approval or director qualification (70%).
Respondents were divided about the relevance of the rules on their organisation, a third (32%) replied ‘at least some extent’, with just 9% saying it was relevant ‘to a great extent’.
HMRC’s own guidance stresses the need for companies to assess the risk of being exposed to the facilitation of tax evasion by those providing services on their behalf, but only 24% of respondents had done so, and most did not have the risks formally documented.
Large businesses were three times as likely as micro businesses to have assessed this risk (57% compared with 19%). This was also more common among multinational companies (47% versus 22% of those based solely in the UK), London-based companies (35% versus 22% for the rest of the UK) and firms in the finance and insurance sectors (50% versus 24% overall).
Almost a quarter (23%) of all businesses stated they had something in place to monitor and review policies and procedures related to preventing the facilitation of tax evasion, again with large businesses taking the lead on this.
One in 10 businesses had undertaken any internal reviews into compliance and behaviour, with large businesses (35%) and those based in London (18%) most likely to have done this.
Among businesses that had conducted internal reviews, only 2% had discovered misconduct as a result (four cases).
When looking at monitoring and reviewing procedures and undertaking internal reviews in combination, 26% of all businesses stated they had done at least one activity in this area in relation to preventing the facilitation of tax evasion.
Over half of respondents (55%) had at least one procedure in place when they were read out a list of options.
The most common were due diligence procedures associated with specific transactions or customers (34%), or prospective/existing employees or board members with responsibility for managing risks relating to preventing the facilitation of tax evasion (30%).
A small number - only 8% - of businesses had organised internal or external training, or awareness raising activities in the last 12 months that related to the corporate policies and procedures to prevent the facilitation of tax evasion within the organisation.
More worryingly was that HMRC said that it wanted to reach a position where staff in senior positions actively promoted a culture throughout the business that made it clear that facilitating tax evasion would not be not acceptable.
Nearly a third of respondents had appointed board members or senior directors with specific responsibility for risk detection and monitoring (30%) while 20% had named a senior figure to champion compliance with the corporate criminal offences more broadly.
HMRC IPSO Mori report, Evaluation of corporate behaviour change in response to the corporate criminal offences Research Report 529, issued 13 Mar 2019
Report by Pat Sweet