The corporate criminal offence (CCO) of the failure to prevent the facilitation of tax evasion was introduced in September 2017 but relatively little enforcement action has been witnessed to date. The intention behind the legislation was to hold corporate entities to account where their employees (or associated parties) facilitated tax evasion of a third party, either in the UK or aboard. Despite the risk of unlimited financial penalties and the fanfare surrounding its introduction, relatively little enforcement action has been seen to date under the previous Conservative government. As of 30 June 2024 HMRC had only 11 live CCO investigations with a further 28 live opportunities under review. However this now looks set to change under Labour as they seek to fill the £22 billion black hole in the public finances, aiming to raise £5 billion a year by reducing the tax gap of non-compliance providing additional resources to HMRC.
As the ex-head of the Crown Prosecution Service and Director of Public Prosecutions until 2013, Keir Starmer will be well aware of the available legislation in his arsenal to clamp down on those that seek to cheat the public purse. The CCO legislation has been a high priority issue for HMRC customer compliance managers for a number of years, but meaningful action taken by corporates to implement appropriate policies and procedures has been mixed.
In his speech on 27th August 2024 the new Prime Minister told the country to be ready for a “painful” budget in October, promising “action not words” with a commitment to “introduce legislation and take decisions to protect taxpayers’ money.” The existing CCO legislation already looks to be bolstered by the Economic Crime and Corporate Transparency Act (ECCTA) which will be fully implemented in 2025 and will impact large organisations. Under the ECCTA, an organisation will be liable where a specified fraud offence is committed by an employee or an agent, for the organisation’s benefit, and the organisation did not have reasonable fraud prevention procedures in place. Economic crime in this context includes: money laundering, terrorist financing, bribery, sanctions evasion, market abuse, fraud, and, importantly, tax evasion.
With the financial services sector being a designated high risk sector, asset managers should look to regularly review their risk assessments (a core requirement under the CCO legislation), maintain appropriate policies / procedures and ensure annual training is in place. As is often the case, evidencing that action has been taken is critical. For those in the market who are yet to be up to speed on the rules, action is long overdue, so swift remedial action is recommended.
For those unfamiliar with the rules, Larkstoke advisors has produced a CPD certified training course focusing on CCO compliance in the asset management industry. The e-learning course can be accessed via the Larkstoke Academy platform. Asset managers that need additional support are urged to reach out to us. Our template package is available to tailor to the needs of every business and designed to ensure appropriate compliance with the rules is adhered. To find out more about how we can help please get in touch.