New employer liability for failing to prevent facilitation of tax evasion
The Criminal Finances Act 2017 came in to force on 30th September 2017 creating new criminal offences for employers who fail to prevent employees from criminally facilitating tax evasion in the UK or abroad.
Currently, employees can face individual criminal prosecution for facilitating tax fraud. The new criminal offence makes it easier for employers to be held criminally liable as it removes the need for prosecutors to show that senior members of the business were aware of, or involved in, the tax evasion.
The new criminal offence is set out in three steps:
- The tax payer criminally evades tax liability under existing laws;
- The tax evasion is criminally facilitated by an associated person of the organisation; and
- The employer fails to prevent the associated person from committing the criminal facilitation.
The use of “associated person” means this offence covers any deliberate or dishonest action by employees and any agents or individuals who provide services for, or on behalf of, the company e.g. sub-contractors.
This is an offence of strict liability meaning employers will be liable for the criminal offence if stage one and two are proven. To be guilty of failing to prevent facilitation of tax evasion abroad, extra requirements have to be met including being a relevant organisation and showing “dual criminality” in the UK and the overseas jurisdiction. The potential penalties for guilty employers are unlimited fines and other orders, such as a confiscation or serious crime prevention order.
Employers may, however, be able to claim a defence. The defence is available where the employer can prove they have reasonable prevention procedures in place to prevent the criminal facilitation of tax evasion, or where they can prove it would be unreasonable to have these procedures in place.
Reasonable prevention procedures will include measures such as:
- Carrying out regular risk assessments to assess the risk of criminal facilitation taking place;
- Having fraud prevention policies and procedures in place;
- Providing training to all staff on the company policies; and
- Performing due diligence on employees, third parties and clients to minimise the risk.
Updated list of prescribed persons for whistleblowing
Workers receive protection under whistleblowing laws where they make a protected disclosure to certain individuals. Outside of their employer, there is a list of over 60 organisations and individuals who are designated as a ‘prescribed person’ for the purpose of making a disclosure of past, current or future wrongdoing. This list was amended with effect from 1 October 2017.
Amendments to trade union balloting
From 1 October 2017, the list of persons qualified to supervise legally required ballots and elections for trade unions, and the bodies qualified to conduct a ballot for recognition and derecognition of trade unions for collective bargaining purposes, were amended.