The new corporate criminal offence of failing to prevent the facilitation of tax evasion (CCO): Is your organisation prepared?

With legislation effective as of September 2017 organisations of all sizes across all sectors are building a response to the risk that they could be prosecuted for failing to prevent the facilitation of tax evasion by persons who act on their behalf.

We have helped organisations identify risk through rapid assessments, developing prevention procedures consistent with HMRC’s guidance.

Have you identified the risk to your organisation?

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What are ‘reasonable procedures’ to prevent the facilitation of tax evasion?

To respond to the legislation, HMRC recommends that businesses should put procedures in place that are proportionate to the risks they face, using the following six principles as a guide:

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

Read our guide to securing compliance

Securing long-term compliance with the requirements of the Criminal Finances Act 2017 means embedding the processes into business as usual.

This document gathers input from professionals across EY and considers the minimum standards along with the along with evolving and best-in-class compliance activities for all organisations.

Download the guide

How EY can help

Developing a proportionate response to the corporate criminal offence of failing to prevent the facilitation of tax evasion can incorporate a range of actions, but begins with understanding the risks. Below we summarise the typical framework for building a response, and some common activities undertaken.

 

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Common questions our clients ask

What is the corporate criminal offence?

The UK Government introduced the CCO, effective from 30 September 2017, as part of the Criminal Finances Act 2017. Organisations which fail to prevent those acting for or on their behalf from facilitating tax evasion face becoming criminally liable themselves.

This legislation must be considered by every organisation doing business in, with, or through the UK. Aside from the reputational risk of failing to put ‘reasonable procedures’ in place, the corporate criminal offence may result in a criminal prosecution leading to an unlimited financial penalty, a public record of the conviction and potential implications for the ability to trade.

Who in the business should lead the project?

Our experience is that tax, compliance and legal will all have a role in delivering the project, with key business functions also involved in helping perform the risk assessment. Tax in particular has a key role at the outset in identifying the areas of facilitation of tax evasion risk that could arise across the organisation.

Should we adopt a global or a local response?

The scope of the legislation is significant, potentially impacting a number of international transactions. It is important at an early stage to assess whether a global response is appropriate when scoping the project, and in many cases businesses have determined that this is the most effective way of responding to the legislation.

What role can existing Anti-Bribery and Corruption (ABC) policies play in responding to the legislation?

The legislation is similar in approach to the Bribery Act, and businesses should therefore be familiar with HMRC’s guiding principles. Whilst it is necessary to undertake an assessment to understand the risks that need to be addressed, it should then be possible to build on the existing ABC framework to address them.

Can I simply amend my ABC policies and the terms and conditions in my contracts to mention the facilitation of tax evasion?

It may be the case that a proportionate response to the risk assessment is to simply amend policies and contractual terms if you have concluded that this amounts to reasonable procedures. However, it is important to first perform the risk assessment, as this will enable you to determine whether policies and contracts need to be amended at all and, if they do, the risk the amendments are seeking to address.

I’m not in the financial services sector and consider my business to be low risk; do I still need to do anything?

Whilst the financial services sector is one of the industries at higher risk, the legislation applies to all industries and there are a number of risks that permeate across many. If a business appears to be low risk, it will be important to document why, and the risk assessment need not be an onerous exercise.

Our corporate criminal offence team