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What are the penalties for failing to prevent the facilitation of tax evasion?

The issue of tax evasion can have severe consequences for businesses.

In the United Kingdom, the Criminal Finances Act 2017 introduced stringent measures to tackle the problem, including holding companies accountable for failing to prevent the facilitation of tax evasion.

Businesses of all sizes must understand the implications of this legislation to mitigate risks and avoid penalties.

What the Criminal Finances Act 2017 says

Under the Act, a business can be found guilty if it fails to prevent its employees, agents, or even external contractors from facilitating tax evasion. The law applies to both UK and foreign taxes.

The penalties for non-compliance are severe, including unlimited financial fines, reputational damage, and the potential for additional sanctions such as being barred from tendering for public contracts.

To establish a defence against such charges, a business must demonstrate that it has put in place “reasonable prevention procedures” to prevent the facilitation of tax evasion.

These procedures could include staff training, regular risk assessments, and stringent internal controls.

The absence of such preventative measures could be seen as a failure on the part of the business, leading to prosecution.

Small vs large businesses

It’s worth noting that the law applies to all businesses, irrespective of their size.

However, what is considered “reasonable” in terms of prevention procedures may vary depending on the size and nature of the business.

Small businesses may not need as extensive procedures as larger corporations, but they still need to show a genuine commitment to preventing the facilitation of tax evasion.

The Act also has a ‘global reach’, meaning a UK business could be prosecuted for failing to prevent the facilitation of tax evasion that occurs overseas.

This makes it essential for businesses with international operations or partnerships to ensure their prevention procedures are robust on a global scale.

Practical tips

Here are some practical tips for ensuring your business has taken all the relevant measures to prevent the facilitation of tax evasion:

The Criminal Finances Act 2017 has significantly upped the ante for businesses in relation to tax evasion.

The burden is now on businesses to show that they are actively working to prevent the facilitation of tax evasion, both domestically and internationally.

Failure to do so can result in severe financial and reputational damage. Therefore, businesses must review their internal procedures and ensure they follow the law.

Ignorance is not an excuse, and the penalties are too significant to ignore.

Speak to one of our experts to find out how you could prevent tax evasion from occurring in your business.


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