The Criminal Finances Act 2017: is your company prepared?


Susie Walker

Susie Walker

Partner & Head of Tax


The Criminal Finances Act 2017 was enacted on 27th April 2017. HMRC have indicated that they will give companies a period of grace until September 2017 to get procedures and controls in order to help demonstrate that they are not facilitating tax evasion. 

Businesses need to start consider this new offence and perform risk assessments to minimise their risk of tax exposure. The regulations are likely to mean that companies have to conduct more checks on suppliers, contractors and employees particularly where cash payments are made for goods or services.

Johnston Carmichael have specialist teams combining audit, tax and data analytics experts which can help companies conduct risk reviews and put a control framework in place.

What is the Criminal Finances Act 2017?

The legislation creates two new offences:

  1. Applies to all businesses wherever located in respect of the facilitation of UK tax evasion;
  2. Applies to businesses with a UK connection in respect of the facilitation of non-UK tax evasion.

There are two stages for corporate offenses to apply:

  1. Criminal tax evasion must have taken place; and
  2. A person/entity who is associated with the business must have criminally facilitated the tax evasion whilst performing services for that business.

Please note that the offence only applies if the person was acting on behalf of the business not where they are acting in a personal capacity.

Who does this affect?

The offences apply to both companies and partnerships and make a business vicariously liable for the criminal acts of its employees and other associates even if the management team were not involved or not aware of what was going on. 

How Johnston Carmichael can help:

A business will have a defence if it can prove that it has put in place reasonable prevention procedures to prevent the facilitation of tax evasion taking place or where it was not reasonable in the circumstances to expect there to be procedures in place.  HMRC guidance suggest six principles that underpin the defence being:

  • Risk assessment;
  • Proportionality of risk-based prevention procedures;
  • Top level commitment;
  • Due diligence;
  • Communication and training; and
  • Monitoring and review.

Johnston Carmichael can assist businesses with risk assessments using data analytics tools and can work in partnership with you to develop a controls and risk framework tailored to your business and proportionate to your size and risk profile.

If you'd like to discuss this issue further, please email me directly at Susie.Walker@jcca.co.uk or another member of our Corporate tax team.