HMRC Launches Consultation on New Corporate Offence of Failing to Prevent the Facilitation of Tax Evasion

31 July 2015

On 16 July, HMRC published a consultation paper on the introduction of a new offence for corporations which fail to prevent the facilitation of tax evasion.  This consultation is one of the four consultations on harsher penalties for tax evasion which were previewed in the Budget 2015 and a recent publication “Tackling Evasion and Avoidance”.

There is no draft currently on the table, but the consultation proposes a new offence of corporations failing to take reasonable steps to prevent the facilitation of tax evasion by their agents. 

It is clear from the consultation that HMRC has not yet decided on the boundaries of any new offence.  Questions test the whole scope of the offence including which taxes it should apply to, which organisations can commit it, and what defences there should be.

That being said, from the examples, the offence looks to be primarily targeted at banks, fiduciaries and professional advisers whose staff assist customers to evade tax. It is contemplated that the offence will have a very wide territorial reach, covering both evasion of non-U.K. taxes and non-U.K. corporations.

While it is certainly too soon to predict the form of the new offence, the language and form of the consultation is reminiscent of the Bribery Act consultation from 2008/9.  It is conceivable, if not likely, that any offence might mirror the corporate offence at s.7 of the Bribery Act 2010.  Some of the questions appear to positively reinforce this idea. If this is the case, we might see a strict liability of failing to prevent the facilitation of tax evasion, with a defence of taking reasonable steps (in the parlance of the consultation paper) or adequate procedures (in the parlance of the Bribery Act).

Another parallel to the recent Bribery Act is the suggestion that guidance should be issued.  This was a key issue in the Bribery Act guidance with firms getting very concerned about the scope of the new offences in that Act.  It appears HMRC has learned lessons from that consultation in designing this one.

The consultation closes on 8 October 2015 at which point HMRC will begin drafting legislation.