Are you compliant with the Criminal Finance Act 2017?

Chris Barlow, MHA MacIntyre Hudson

MHA MacIntyre Hudson’s Chris Barlow discusses the new Criminal Finance Act 2017 and the implications for businesses.

Most businesses are unaware that as from September 30, 2017, under the Criminal Finance Act, they should have actioned HMRC’s six principles in relation to preventing the facilitation of tax evasion – regardless of the size of the business.

If they have failed to do so, they run the risk of being found criminally liable and face unlimited fines along with immeasurable reputational damage.

While it has been possible to prosecute individuals for the facilitation of tax evasion for many years, the same now applies to relevant bodies, i.e. companies and partnerships.

A tax evasion facilitation offence consists of the following:

Stage 1 – Criminal tax evasion by a taxpayer (either an individual or an entity) under existing UK law.

Stage 2 – Criminal facilitation of this offence by an ‘associated person’ – i.e., a person acting on behalf of the relevant body and knowingly aiding, abetting, counselling or procuring the tax evasion by a taxpayer.

Stage 3 – The relevant body failed to put in place reasonable procedures to prevent an associated person from committing a tax evasion facilitation offence as defined in Stage 2.

HMRC guidance states that if a relevant body can demonstrate it has put in place reasonable prevention procedures that identify and mitigate its tax evasion facilitation risks, then prosecution is unlikely to occur as the relevant body can raise a reasonable defence.

So, do you have procedures in place?

If your response to this question is “what are prevention procedures?” it’s likely you have a fair bit of work to do!

HMRC’s guidance is formulated around six guiding principles:

  1. Risk assessment;
  2. Proportionality of risk based prevention procedures;
  3. Top level commitment;
  4. Due diligence;
  5. Communication and training; and
  6. Monitoring and review.

While most businesses will probably take a light touch approach initially, the expectation is that they will rapidly come to understand the importance of these principles, focusing on the major risks and priorities, with a clear timeframe and implementation plan for putting the assessments into force.

If you’re reading this and thinking ‘we already carry out risk assessments in respect of anti-money laundering’, that’s great – you’re slightly ahead of the game, and these are a useful starting point. But, these assessments were probably designed to deal with other types of risk, so you shouldn’t place too much reliance on them, as this will not be deemed sufficient by HMRC and may lead to prosecution.

What should you do?

It’s really important that all businesses affected grasp a good understanding of what is involved. We understand that the prospect of carrying out and documenting the risk assessment can be daunting, on top of ensuring that any one of HMRC’s other guiding principles are adequately addressed, so we’ve produced a Corporate Criminal Offences Business Planning Guide which can be downloaded here, which should at least help you get started. We can also help you take it one step further and work with you to carry out the risk assessments themselves and implement any changes necessary.

Final thoughts

These provisions will have a significant effect on businesses, requiring them to focus on whether or not their existing policies and procedures (if any exist at all) are sufficient to protect them in the event of scrutiny by law enforcement.

It’s advisable for companies and partnerships to divert their minds towards the six principles set out by HMRC and how to incorporate them into their policies and procedures without delay to avoid any pain with HMRC further down the road.

For more information on this article, or to discuss any other aspect of your business, please contact Chris Barlow (