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UK Consults On Facilitation Of Tax Evasion Offense

by Robert Lee,, London

19 April 2016

The UK Government has launched a consultation on draft legislation and guidance for a proposed new corporate criminal offense: failure to prevent the criminal facilitation of tax evasion.

The consultation follows the Government's announcement that it would fast-track its plans following the leak of the so-called Panama Papers. The proposal was first announced in Chancellor George Osborne's March 2015 Budget, and the Government ran an initial consultation between July and October last year.

According to the latest consultation document, the offense "aims to overcome the difficulties in attributing criminal liability to corporations for the criminal acts of those who act on their behalf."

It added: "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 organization that the current criminal law most advantages."

The Government explained that the offense "will be committed by a corporation where it fails to prevent an associated person criminally facilitating the evasion of a tax, and this will be the case whether the undeclared funds are in or outside the UK."

The offense will have three stages: criminal evasion by a taxpayer under the existing criminal law; criminal facilitation of this offense by a person acting on behalf of a corporation with a view to being knowingly concerned in or aiding, abetting, counseling, or procuring the said tax evasion; and the corporation's failure to take reasonable steps to prevent those who acted on its behalf from committing the criminal act outlined at stage two.

The draft legislation requires that the facilitation "be done by a person acting in the capacity of a person associated with the corporation, defined as 'someone acting on its behalf.'"

The Government said: "Irrespective of whether the associated person is an employee or a contractor, if the person criminally facilitating the tax evasion is acting on behalf of the corporation, this should suffice for the new offense. Otherwise a corporation could seek to contract itself out of the scope of the new offense by always acting through contractors rather than employees."

The consultation will close on July 10.

TAGS: compliance | tax | business | value added tax (VAT) | tax compliance | revenue guidance | law | employees | United Kingdom | ministry of finance | tax authority | corporate governance | contractors | legislation | tax rates | Panama | Tax | Tax Evasion

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