U.K. Expands Investigations of Companies for Allowing Tax Evasion

In a 10 February 2020 release, HM Revenue and Customs said it is investigating nine companies and could open as many as 21 more investigations concerning noncompliance with U.K. requirements that companies work to prevent tax evasion facilitation.

Under the Criminal Finances Act of 2017, corporations must implement procedures to prevent employees and other persons associated with the company from helping others to evade taxes. Failing to do so can subject the corporation to potentially unlimited penalties, including unlimited fines, a criminal record, restricted access to some markets, and limited ability to bid for domestic and international government contracts. According to the HMRC, the law is intended to hold the entities “criminally liable where they fail to prevent those who act for [them], or on their behalf, from criminally facilitating tax evasion.” The companies currently under investigation operate in a range of industries and include both large and small corporations.

These investigations are not about pursuing the company for its own fraudulent activities. Rather, the law is intended to force companies to work to prevent the facilitation of fraud by their employees or associates. Companies must perform risk assessments and impose controls to ensure they are preventing tax evasion at all stages of their supply chains. In essence, companies must be prepared to prove to the government that they have measures in place to prevent, for example, bribery. The law acts in concert with the U.K. Bribery Act, but is more expansive.

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How This Impacts Mobility

Like many other laws, such as privacy laws, that seek to govern corporate behavior, the U.K. law requires attention. In view of the seriousness with which the U.K. authorities are approaching it, that attention should take place sooner rather than later.

Worldwide ERC® member companies operating in the U.K. should be aware of the requirement to put in place appropriate policies and procedures to prevent fraud and take the necessary steps if they have not already done so.