By Simon Bushell, Sean Finn and Daniel Smith
The fallout from the Panama Papers continued with the publication of a further consultation by the UK Government on its proposed corporate tax evasion offence. The offence will introduce criminal liability for organisations who fail to prevent their associated persons from facilitating tax evasion, including employees, subsidiaries, professional advisors or any other person performing a service on their behalf.
The proposed offences will have a broad extra-territorial reach. UK businesses may find themselves liable not only for their failure to prevent facilitation of tax evasion domestically, but also for foreign tax evasion offences. Overseas companies will similarly be caught where they fail to prevent facilitation of UK tax evasion, or foreign tax evasion where part of the offence takes place within the UK.
Defences are available where organisations can demonstrate that they have reasonable prevention procedures in place or that it is unreasonable in the circumstances to have prevention procedures in place. Draft guidance makes clear that reasonableness is judged by the scale and level of risk faced by the business, meaning large organisations and those with cross-border operations will be expected to have significant controls in place. Financial institutions will be particularly affected, with the offence adding to the plethora of regulations with which they must already comply.
The proposed offence provides businesses with a range of issues to consider including not only the implementation of internal controls, but also on the tax evasion risks associated with proposed expansions, M&A transactions, joint ventures and other investment activities.
For further analysis of the draft offence, government guidance and our top 10 concerns for businesses click here.
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