Tax-evasion rules require compliance plans by 30 September

Firms must show their risk assesments and a timeline under the rules, which make failure to prevent facilitation of tax evasion a criminal offence.

The UK tax authority will give firms more time to prepare for compliance with the Criminal Finance Act, but expects them to have certain measures in place in time for its enforcement this Sunday.

Firms must demonstrate that senior management are committed to preventing facilitation of tax evasion – as failure to do so becomes a criminal offence – and that they have conducted a risk assessment, have communications plans, and a timeline for full compliance with the requirements, from 30 September.

“As a first step, it is critical that fund managers in this situation carry out a risk assessment, with a view to putting in place a reasonable policy for each entity they think may be affected by these rules. Importantly, they will need to analyse their fund structures and third-party service provider arrangements to see which entities are relevant and therefore require such a policy,” Laura Charkin, tax partner at Goodwin, told pfm.

The full compliance program should be based on six principles that Her Majesty’s Revenue and Customs said should be applied in a “risk-based and proportionate rather than prescriptive way.” These principles are: risk assessment, proportionality, top-level commitment, due diligence, communication and montitoring and review.

“The requirement for procedures to be reasonable, rather than adequate as for anti-bribery and corruption procedures under the Bribery Act, means anti-tax evasion policies will be scrutinized with greater reference to the overall context of the business,” Goodwin said in a client note.

Having in place reasonable procedures to prevent tax evasion facilitation offences can be used as a defence in a prosecution.

The regulation’s aim is to hold corporate entities to account for the action of associated persons – including employees and service providers – and to prevent situations where lax compliance cultures “encourage individual employees to commit criminal offences.”