Tax Evasion: Could You Be Caught Red-Handed?

The Government’s commitment to combat tax avoidance and evasion, as well as other forms of economic crime, could mean you unwittingly being caught red-handed.

Why Now?

As of 30 Sep, the Criminal Finances Act 2017 includes measures that mean businesses must have procedures in place to prevent criminal facilitation of tax evasion.

Prior to this, prosecutors attributing criminal liability for tax evasion to a business needed to demonstrate members of the business were involved in and aware of the illegal activity.

Usually this was focussed at the Board of Directors level.

“The new offence alters the scope of liability and who is held to account for acts of criminal tax evasion, by covering all those who act for or on behalf of a corporation.”

This means that, as well as having ‘reasonable prevention procedures’ in place, there must also be procedures in place for anyone ‘associated with’ your business.

This includes employees, suppliers, agents and intermediaries – essentially anyone who provides services for or on behalf of the oganisation.

Although the Act aims to tackle tax evasion crimes committed by those who act for or on behalf of a company,businesses will not be held accountable for any crimes committed by their customers.

Nor will they be penalised for any customer misuse of the legitimate products and services provided good faith.

Why You?

3 Reasons To Act Without Delay:

  1. Tax evasion offences are punishable under both UK and international law, and failing to prevent tax evasion carries an unlimited financial penalty
  2. Reputational damage is inevitable
  3. Disclosure of breach may be required to professional regulators and a conviction may disqualify companies from eligibility for public contracts.
    1. The Criminal Finances Act 2017: 3 Areas

      There are three areas covered by the legislation:

      1. Criminal evasion of tax by the taxpayer
      2. Criminal facilitation of the tax evasion by an ‘associated person’ of the relevant body who is acting in that capacity
      3. Failure by the relevant body to prevent that facilitation.

      “Reasonable prevention procedures must be in place to benefit from the statutory defence.”

      What Are ‘Reasonable’ Prevention Procedures?

      The government has produced guidance on the reasonable prevention procedures and has published six guiding principles.

      These principles are similar to those identified in guidance to the Bribery Act 2010, so there may be some efficiency in developing procedures alongside those already in place.

      The six principles are:

      1. Risk assessment
      2. Proportionality
      3. Top level commitment
      4. Due diligence
      5. Communication
      6. Monitoring and review

      How Do You Best Implement These Principles?

      You’re likely to have an existing due diligence programme in place as a result of the Bribery Act 2010.

      “Ideally your response to this new offence can sit within your existing governance framework.”

      Risk Assessment

      The business must assess the nature and extent of its exposure to the risk of those who act for or on its behalf.

      To do this, you should identify areas, including:

      • Potential risks of tax evasion facilitated by an associated person
      • Areas of the business which pose the greatest risks – this is often finance and legal departments
      • What business practices could contribute to risk
      • Type of transactions that could create risk
      • The extent to which existing procedures mitigate those risks
      • Where the gaps are.


      These procedures will depend on the levels of control and supervision that a business is able to exercise over a person acting on its behalf and the proximity of that person.

      The framework and procedures will need to be adapted to address specific risks, including geographic locations.

      Procedures should also evolve as the risk climate and corporate activity changes.

      Top Level Commitment

      Those at board level must commit to the principles and a policy statement affirming their commitment is good practice.

      Senior employees need to foster a culture in which facilitation of tax evasion is never acceptable.

      Due Diligence

      All procedures should take an appropriate and risk-based approach.

      There should also be proportionate checks on “associated persons” whose functions could pose potential risks and facilitate tax evasion offences.


      The company’s policy should be communicated internally.

      Appropriate and ongoing training should be provided for all staff and “associated persons”.

      Whistleblowing channels should also be in place.

      Monitoring and Reviewing

      A monitoring programme should be put in to place, including regular checks on relevant “associated persons”.

      Your Next Best Steps to Protect Yourself

      Organisations are expected to have identified major risks and priorities.

      In addition, they should have a clear implementation plan in place, including reasonable prevention procedures, based on the six guiding principles.

      The Government recognises that some procedures, such as training programmes and IT systems, will take time to put into place.

      Therefore, prevention procedures planned (but not yet in place) at the time of an offence will be taken into consideration.

      However, this grace period will come to an end!

      An experienced finance professional can help you to identify your risks and develop a plan to ensure compliance.

      At Horus Consulting we help businesses like yours in all aspects of financial reporting, planning and analysis.

      Together we can create a framework to ensure that you are doing enough to prevent the facilitation of tax evasion.