On April 17, 2016 the UK Government published a consultation document titled: “Tackling tax evasion: legislation and guidance for a corporate offence of failure to prevent the criminal facilitation of tax evasion”. This consultation follows an earlier consultation at stage 2 of the consultation process which ran from July 16 – October 8, 2015  and of which a summary of responses was published by the UK Government on December 9, 2015.

This consultation considers draft legislation and guidance for the new corporate criminal offence of failure to prevent the criminal facilitation of tax evasion, as outlined in HMRC’s response document of December 9, 2015.

 

In the document it is stated that the UK Government seeks stakeholder views on draft legislation and guidance for a new corporate offence of failure to prevent the criminal facilitation of tax evasion to ensure that the offence is both effective at meeting the stated objectives and not unduly burdensome.

 

The consultation closes at July 10, 2016.

 

The consultation document states the following with respect to the policy objectives of the new offence:

·        The new corporate offence aims to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf. Whilst this consultation refers to the application of the new offence to “corporations”, the draft legislation refers to a “relevant body” to encompass the broad range of legal persons to which the new offence will apply.

·        Attributing criminal liability to a corporation normally requires prosecutors to show that the most senior members of the corporation were involved in and aware of the illegal activity, typically those at the Board of Directors level. This has a number of impacts:

o       In large multinational organisations decision making is often decentralised and may be taken at a level lower than that of the Board of Directors, with the effect that the corporation can be shielded from criminal liability. This also makes it harder to hold such organisations to account compared to a smaller organisation where decision making is centralised.

o       The existing law can act as an incentive for the most senior members of a corporation to turn a blind eye to the criminal acts of its representatives in order to shield the corporation from criminal liability.

o       The existing law can act as a disincentive for internal reporting of suspected illegal activity to the most senior members of the corporation.

·        The cumulative effect is an environment that does not foster corporate monitoring and self-reporting of criminal activity. The criminal law currently renders corporations that refrain from implementing good corporate governance and strong reporting procedures hard to prosecute, and offers no incentive to invest in such procedures. It is those corporations that deliberately turn a blind eye to wrongdoing and preserve their ignorance of criminality within their organisation that the current criminal law most advantages.

 

The consultation document furthermore discusses subjects like a.o.:

·        Areas of consultation

o       The offence

o       Those for whom a corporation can be liable

o       Definition of a corporation

o       The aspects of non-compliance covered by the offences

o       Overseas tax fraud corporate offence

o       Territorial scope of the overseas tax fraud corporate offence

·        Draft guidance for the new corporate offence of failure to prevent the criminal facilitation of tax evasion

o       Purpose of guidance

o       Relevant Body

o       Associated Person

o       UK Tax Evasion Offence (by a taxpayer)

o       UK Tax Evasion Facilitation Offence (by an associated person)

o       Foreign Tax Evasion Offence

o       Principle 1 proportionality of reasonable procedures

o       Principles 2 top level commitment

o       Principle 3 Risk assessment

o       Principle 4 Due diligence

o       Principle 5 Communication (including training)

o       Principle 6 monitoring and review

·        Assessment of Impacts

·        Summary of Consultation Questions

·        The Consultation Process

 

The following 2 annexes are included in the consultation document:

·        Annex A: Draft clauses published in December 2015

·        Annex B: Amended draft clauses published

 

Click here to be forwarded to the consultation document as published by the UK Government on April 17, 2016.

 

Those interested can find the summary of responses which was published by the UK Government on December 9, 2015 here.

 

 

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