HMRC opens corporate tax evasion consultation

HM Revenue and Customs (HMRC) has launched a consultation designed to gain input on a new offence targeted at businesses that fail to prevent tax evasion.

The proposed ruling would make companies criminally liable for failing to prevent their staff facilitating tax evasion. It’s a crackdown that’s developed amid growing political pressure on the Government to show a tougher stance towards tax evaders due in no small part to the recent Panama Papers leak and the state of the national economy.

Presently, HMRC fears that companies can easily blame their staff for any tax wrongdoing, escaping the blame for assisting those who break UK tax rules.

The new proposed rules will ensure companies must show they took “reasonable steps” to thwart staff or agents from “aiding, abetting, counselling or procuring tax evasion” for customers both in the UK and abroad.

In previous tax evasion cases, prosecutors have been required to demonstrated the senior members of staff or board directors knew that the firm was assisting their clients to evade tax.

HMRC said in its consultation document: “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.

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

The banking sector has already adopted a similar approach, where the bosses of failed banks will have to demonstrate they acted responsibly in the running of their bank.

The law makes it very clear to bosses that they need to remain fully aware of what their junior managers are doing and to stop senior executives from absolving themselves from any blame in the event of legal charges.

Last week, Prime Minister David Cameron revealed the launch of a new UK tax taskforce, headed up by the HMRC and the National Crime Agency, and stated that the taxman was already following up more than 700 leads linked to the Panama Papers leak.

Date published 19 Apr 2016 | Last updated 19 Apr 2016