Market leading insight for tax experts
View online issue

Tax evasion facilitation consultation

printer Mail
The latest consultation paper published by the government on its plans to hold corporate bodies criminally liable for failing to prevent the facilitation of tax evasion was released on Sunday, and was apparently accelerated in anticipation of the London Anti-Corruption Summit on 12 May. As the accompanying press release makes plain, however, it is also an attempt by the government to be seen to be reacting to criticism which has been levied since the release of the Panama Papers. The rights and wrongs of the draft provisions within the latest legislative iteration, whether of a practical, legal or political nature, are not considered here. For the present purpose, we examine the principal ways in which the latest version differs from previous drafts. 
There is firstly an expansion in the definition of the facilitation of foreign tax evasion. This now includes the stipulation that ‘any act or omission forming part of the foreign tax evasion facilitation offence takes place within the UK’. In practice, this means it would theoretically be possible to prosecute a foreign company for the failure to prevent foreign tax evasion if any part of the facilitation, however insignificant, took place within the UK.
The second major difference is an amendment in the definition of facilitation of UK tax evasion. Previously, this included ‘encouraging or assisting the commission of the offence’. This vague definition has now been dropped, meaning that the facilitation in question would be said to have occurred if the person in question ‘aids, abets, counsels, procures’ or is ‘knowingly concerned in’ the commission of the offence.
The third change relates to the expanded defences available to the corporate in question, in relation to both the UK and overseas offences. The initial consultation stated that the corporate concerned must show that they had reasonable prevention measures in place, as is the case within the Bribery Act 2010. The new draft proposes that, additionally, no offence will have been committed if it is held to be reasonable for the corporate in question not to have had prevention procedures in place. Quite what would constitute reasonableness is not entirely clear, and would in practice be subject to judicial interpretation in the event of prosecution, but it is worth noting that this late addition may have the potential to offer smaller entities some escape from liability and release them from the unduly burdensome compliance procedures.  
Andrew Smith & Danielle Reece-Greenhalgh, Corker Binning 
Issue: 1305
Categories: In brief , Anti-avoidance