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The Chartered Institute of Taxation (CIOT) set out their concerns in response to a HMRC consultation on the new corporate criminal offence. The new offence aims to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf.
Glyn Fullelove, Chair of CIOT’s Technical Committee, said: “We support the intention behind this legislation, which is to ensure that companies take measures to prevent their staff helping clients of the company or indeed anybody else, evade tax. While this has particular relevance to the financial services industry, all companies should be aware they have a responsibility to avoid criminal acts being perpetrated by their staff; and the possibility of the company itself being prosecuted for failure to prevent its staff assisting evasion should make that very clear.
“At the same time, we do not wish to see the serious nature of a criminal prosecution downgraded by prosecutions in relatively small cases that simply add an extra fine on top of civil penalties and are a long way distant from the behaviours that have spurred the introduction of the offence.
“If the Government believes that criminal sanctions need to be strengthened in this area, then it would be sensible to apply it only in significant cases where large organisations have failed to take their obligations seriously.
"Prosecuting a small company for failing to prevent the evasion of, for example, a small amount of VAT, where the company can already be subject to heavy tax penalties, and where the staff who actually perpetrated the evasion can themselves be prosecuted, could be seen as one punishment too many for the small firm involved and is unlikely to affect the conduct of the management and the overseas staff of a major multinational bank.”
Delay
The CIOT is calling on HMRC to consider a delay to the September 1, 2017 introduction. It believes the deadline does not give HMRC enough time to respond to the concerns of tax practitioners, such as how the new criminal sanctions will sit alongside the civil penalties currently in place for corporate cases of tax avoidance, or about the need for clearer guidance on what practical steps businesses can take.
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Glyn Fullelove said: “It is very important that companies can properly assess the procedures they will need to put in place to have a statutory defence. Given this offence can encompass overseas as well as UK tax evasion, for many companies this will involve a global roll-out of new policies We ask that HMRC seriously considers delaying implementation of this measure.“
The CIOT also told HMRC in its response to the consultation that the new offence must be subject to appropriate defences being available, that clear and unmistakable guidance must be provided by the Government so that corporations understand exactly what measures they must put in place to comply.
The offence will have three stages: stage one: criminal tax evasion by a taxpayer (either an individual or an entity) under existing law; stage two: criminal facilitation of this offence by a person acting on behalf of the corporation as defined by the Accessories and Abettors Act 1861; stage three: the corporation failed to take reasonable steps to prevent those who acted on its behalf from committing the criminal act at stage 2. The offence relates to companies and therefore the statutory punishment for a conviction would be a fine for the company.
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Susie Hughes © Shout99 2016
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