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Corporate Criminal Offence (CCO)

Tax-Investigations

Corporate Criminal Offence to Fail to Prevent the Facilitation of Tax Evasion (CCO).

WHAT IS IT?

The Corporate Criminal Offence (CCO) legislation came into effect on 30 September 2017, under the Criminal Finances Act 2017. It applies to the evasion of any and all taxes anywhere in the world and there is no de-minimis limit.

There are two separate potential offences under CCO:

  • The facilitation of UK tax evasion by any business (wherever located), and

  • The facilitation of non-UK tax evasion by any business with a UK connection.

A successful prosecution could lead to an unlimited fine, public record of the conviction and significant reputational damage.

The business’ only line of defence is that it had ‘reasonable prevention procedures’ in place. “Reasonable” has not been defined but is taken to mean that the corporate should:

  • Identify, categorise and document the specific risks of facilitation of tax evasion,
  • Identify existing controls in place to manage those risks,
  • Put a plan in place to address any identified shortfall in procedure,
  • Communicate and train employees and relevant associates, and
  • Ensure that ongoing monitoring and reviews are undertaken.

HMRC have been clear that standard KYC and AML checks are not sufficient.

HMRC have been similarly clear that ignorance is not an excuse (i.e. not having reviewed your client database and thus being unaware of a potential issue will not provide protection from CCO).

WHO DOES IT AFFECT?

All corporates are within scope and may be held criminally liable for failing to prevent the facilitation of tax evasion by one of its associates (i.e. employee, contractor or any person providing services for or on its behalf).

CCO is having a significant impact on overseas fiduciaries, accountants, tax advisers, lawyers and the wider financial services, who are the primary targets of the legislation.

Particular care should be taken if HMRC open an enquiry or investigation into one of your clients as you may be conflicted. Instructing a specialist to assist with the enquiry and to review your internal procedures can help reassure HMRC that (where relevant) the case is a one-off, rather than being reflective of your wider client base.

With CRS now in full flow and the 30 September “Requirement to Correct” deadline fast-approaching, it is more likely than ever that HMRC will identify any potential UK tax irregularities. Acting fast to ensure that your clients are tax compliant and that you are protected is essential.

WHY HAS IT COME IN?

HMRC will no longer have to prove that senior management knew about the facilitating of tax evasion by a customer or supplier in order to criminally prosecute. This will make it easier for HMRC to impose sanctions and more difficult for corporates to avoid prosecution by ‘protecting’ the board members from information.

HOW IS IT BEING USED?

Where a taxpayer has been caught evading tax, HMRC can use CCO to understand the role played by any advisers and whether there is a systemic fault.

HMRC may also undertake “ad-hoc” checks of corporate fraud prevention procedures.

CCO therefore pushes significant onus onto intermediaries to ensure that their supply chain is tax compliant.

HOW CAN HAMILTON ROSE HELP?

Hamilton Rose can undertake a review of your controls and systems to ensure that they are sufficient to demonstrate due diligence around preventing the facilitation of tax evasion by your associates.

Hamilton Rose also have access to specialist software that can identify a structure’s non-compliance with UK tax legislation. Using this software to review your client database is a demonstrable process for CCO purposes.

Should an issue be identified that needs resolving, we have 25 years of combined experience dealing with voluntary disclosures – we know how to ensure that any matter is dealt with quickly and pragmatically and that your best interests and assets are protected.