UK Update on Corporate Criminal Offences Legislation to Combat Tax Evasion

In the March 2015 Budget, the UK government announced measures to make it a crime for corporations to fail to implement reasonable procedures to prevent their associates from facilitating tax evasion. The aim was to hold corporations criminally liable if they failed to prevent individuals acting on their behalf from engaging in such activities. This initiative was formalized with the introduction of the Corporate Criminal Offences (CCO) for failing to prevent the facilitation of tax evasion under Part 3 of the Criminal Finances Act 2017.

CURRENT STATUS AND IMPACT

The CCO legislation, effective from September 30, 2017, imposes potentially unlimited fines on organizations found guilty of these offenses. This regulation is designed not only to increase corporate prosecutions but also to shift industry practices and attitudes towards risk. Organizations are encouraged to adopt proactive measures to prevent tax crime. HM Revenue and Customs (HMRC) focuses on high-risk sectors and prioritizes cases that significantly impact behavioral change within industries.

LATEST DEVELOPMENTS AND STATISTICS

As of June 30, 2024, HMRC has made progress under the CCO legislation:

• Live Investigations: There are currently 11 active CCO investigations, with no charging decisions made yet.

• Review Opportunities: An additional 28 opportunities are under review. HMRC has assessed and rejected 101 other opportunities.

• Sector Coverage: These cases span 11 different business sectors, including software providers, labor provision, accountancy, legal services, and transport.

• Outcome Variability: The number of investigations will naturally fluctuate as part of the criminal investigation process. Not every opportunity leads to an investigation, nor does every investigation result in charges. In some cases, investigations revealed no deliberate facilitation, although other tax and regulatory offenses were identified and are being pursued.

The legislation's primary aim is to drive preventative measures within organizations to minimize the risk of facilitation, with success measured by these procedural changes rather than the number of investigations alone.

FUTURE UPDATES AND FURTHER INFORMATION

HMRC plans to provide updates biannually, maintaining taxpayer confidentiality regarding specific CCO investigations. Detailed information about the legislation and guidelines can be found in the government publication "Tackling tax evasion: Government guidance for the corporate offenses of failure to prevent the criminal facilitation of tax evasion."

Organizations suspecting they may have committed these offenses are encouraged to report through the corporate self-reporting portal.

SOURCES/ RECOMMENDED READ: 

• Corporate offences for failing to prevent criminal facilitation of tax evasion - GOV.UK (www.gov.uk)

• Number of live Corporate Criminal Offences investigations - GOV.UK (www.gov.uk)