Criminal Finances Act 2017

17 October 2017

The Act makes it a strict liability criminal offence for any entity to fail to prevent the criminal facilitation of tax evasion (whether in the UK or in relation to foreign tax) by associated persons. Its aim is to prosecute professional firms and other ‘relevant bodies’ which fail to take steps to stop employees and other ‘associated persons’ criminally facilitating tax evasion. This is distinct from tax avoidance, which is legal, although the government is clamping down on aggressive tax avoidance schemes and both the SRA and HMRC have recently indicated that they will be increasing their scrutiny in this area: see SRA Warning Notice: Tax Avoidance – Your Duties (21 September 2017).


Tax is widely defined to cover all taxes, such as statutory offences relating to evasion of National Insurance, income tax and VAT and the common law offence of cheating the public revenue.  However, it does require an element of fraud/dishonest intention, so mere non-compliances, such as filing an inaccurate tax return, do not fall within the Act.


The Act focuses on the ‘failure to prevent the crimes of those who act for or on behalf of a corporation, rather than trying to attribute criminal acts to that corporation’ (HMRC guidance). Tax evasion offences have not changed. The Act’s focus is on the procedures which should be in place to prevent the criminal facilitation of tax evasion, and the firm having in place reasonable prevention procedures, or alternatively, being able to show that it was reasonable not to have had such procedures in place, which is the only statutory defence.  However, the Act will not catch legitimate services and advice which are given in good faith, but which are missed by the client.


The Defence: Reasonable Prevention Procedures


As mentioned, having in place reasonable prevention procedures, or being able to show that it was reasonable not to have had such procedures in place, is the only statutory defence.


HMRC guidance suggests the types of processes and procedures which could be put in place to prevent associated persons from criminally facilitating tax evasion, based on ‘guiding principles’ as follows:


1 Risk Assessment: firms must assess the nature and extent of their exposure to the risk that an associated person engages in an activity to facilitate tax evasion. The practice note gives very detailed, useful guidance on how to carry out a risk-assessment to identify the risks, assess the risk-level particular to their practice and implement ‘reasonable and considered controls to minimise those risks’. It is also critical that the risk assessment, as well as any conclusions and actions taken as a result of it, are properly documented and retained and reviewed and updated at appropriate intervals/on the occurrence of certain events; …..



For a full copy of this article, email Andre Tahmassian-Zarneh (Compliance Consultant) at or contact him on 07572 068105.