Defence against new criminal offence for companies and partnerships

…consider the potential defence and actions that need to be taken

defence against criminal actFollowing on from on previous article in relation to The Criminal Finances Act, we consider the potential defence and actions that need to be taken. If you have not read the first article, please do so now.

The penalties for the offence include unlimited financial penalties and ancillary orders such as confiscation orders; however, you can defend yourself in relation to breaches as follows:

Defence against the stage three offence

The defence against the stage three offence applies where the relevant body has put in place ‘reasonable prevention procedures’ to prevent its associated persons from committing tax evasion facilitation offences (stage two), or where it is unreasonable to expect such procedures.

The procedures to put in place are similar in approach to the procedures that can protect organisations from committing a criminal offence under Bribery Act 2010 – namely a failure to prevent bribery by a person associated with the organisation.

Under the Criminal Finances Act, the government must prepare and publish guidance about procedures that relevant bodies can put in place. The published guidance on the new regime includes a section setting out six guiding principles for prevention measures by relevant bodies. The guidance can be found

To quote from the guidance:

These principles are not prescriptive, they are intended to be flexible and outcome focussed, allowing for the huge variety of circumstances that relevant bodies find themselves in.

Procedures to prevent facilitation of tax evasion should be proportionate to risk.”

Risk assessment

The initial stage is risk assessment. Organisations may operate in high to low risk professions or industries. Those involved in financial services, for example, are potentially in a high risk environment. The government suggest that relevant bodies need to ‘sit at the desk’ of their employees and those who provide services for them or on their behalf and ask whether they have a motive, the opportunity and the means to criminally facilitate tax evasion offences, and if so how this risk might be managed.

Reasonable prevention procedures for lower risk SMEs

The legislation applies to all companies and partnerships irrespective of size. However the published guidance states that the guidance is not a ‘one-size-fits-all’ document. The guidance should be considered and applied in a risk-based and proportionate way. So all businesses should undertake and document a risk assessment.

If the assessment concludes the business is low risk, the guidance includes suggested reasonable prevention procedures for lower risk SMEs. Among the suggested procedures are such matters as:

  • demonstrating a commitment to prevention of tax evasion facilitation by issuing a prominent message from the board of directors against all forms of tax evasion
  • providing regular training for staff on financial crime detection and prevention
  • having terms in contracts (with employees and contractors) requiring them not to engage in facilitating tax evasion and to report any concerns immediately.

The new criminal offence for companies and partnerships throws more compliance issues on businesses. Key to coping with the requirements for your business is an initial risk assessment followed by a system of reasonable prevention procedures.

Written policies and procedures are strongly advised in order to demonstrate the work that has been and continues to be done.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Neither Essex Abel Ltd nor the author accept any responsibility whatsoever for any action taken based upon the information included in this article.