HMRC is reported to be investigating alleged violations of a new criminal offence, part of the crackdown on money laundering and tax evasion, for the first time.
A freedom of information request made by law firm Greenberg Taurig revealed there are five current criminal investigations.
The Criminal Finances Act 2017 introduced the new offence of failing to prevent the facilitation of UK tax evasion. The aim of the government was for relevant bodies to be held criminally liable where they fail to prevent those who act for, or on their behalf, from criminally facilitating tax evasion.
What is the actual offence?
The offence is committed where a relevant body fails to prevent an associated person criminally facilitating the evasion of a tax.
Previously in order to attribute criminal liability to a relevant body, you would have to show that senior members of that body were aware and involved, which was much harder.
Tax evasion is defined as an offence amounting to a cheat of the public revenue or any offence consisting of being knowingly concerned in or taking steps with a view to the fraudulent evasion of tax. The offence is only committed where a UK tax evasion offence has been committed if a tax-payer is non-compliant or engaged in avoidance falling short of evasion the offence is not committed.
Facilitation of tax evasion compromises being knowingly concerned in, or taking steps with a view to, the tax evasion of another, as well as aiding and abetting another person’s offence of tax evasion. It is not a criminal offence if an associated person inadvertently or negligently facilitates another’s tax evasion. The facilitation has to be criminal.
The associated person has to commit the offence in the capacity of a person associated with the relevant body. So, if an employee criminally facilitates tax evasion in the course of their private life, they commit an offence but not this one.
Where a tax evasion offence has been committed, and a person acting in the capacity of a person associated with the relevant body has committed a tax evasion facilitation offence, the relevant body will be guilty of the offence.
It is a defence for the relevant body to have in place reasonable prevention procedures, those designed to prevent persons associated with it from committing facilitation offences. This could include regular staff training, contractual terms, compliance monitoring and clear reporting procedures. It is also a defence if it is not reasonable to expect the relevant body to have such procedures.
What is the penalty?
The offence is punishable by way of an unlimited fine and can be dealt with in the Magistrates Court or the Crown Court. There will of course be significant reputational damage to the company and those in charge.
In their 2018 business plan, HMRC set out their target of 100 investigations per year.
The fact that there are only five currently outstanding may be a surprise in the context of their stated intention or may mean that more investigations are imminent.
How we can assist
If you are concerned for yourself or your company, it is important to seek early advice – our criminal law experts are well placed to guide you through this regulatory minefield. If you would like to discuss any aspect of your case, please contact John Howey on 020 7388 1658 or email@example.comRead More
If you were able to listen in to a conference between client and solicitor, you might hear an exchange a little like this one:
‘What am I looking at?’
‘Around 12-15 months, suspended if you are very lucky.’
‘Oh, I can live with that!’
‘But there is something else?’
‘You are going to lose your money, your house and your car.’
What is confiscation?
At its most simple it is the process by which those convicted of a crime are deprived of their benefit from that crime.
So, for example, Jill steals £10,000 from her employer and spends it on a luxury holiday.
Her proceeds from that crime (referred to as the ‘benefit’) is £10,000, so she can expect a confiscation order to be made in that sum.
That sounds fair
Well, it does sound ok on the face of it, but it is a little more complicated than that. The £10,000 from the confiscation order will not go to the employer; it will go to the state.
But the court may also make a compensation order in the sum of £10,000 to repay the employer for their loss.
So, Jill will have to pay £20,000?
It can get a whole lot worse!
For example, Paul steals a Porsche worth £130,000 but a few hours later he is stopped by the police, the car is recovered, and it is returned to its owner.
The ‘benefit’ here is £130,000 (the value of the car), even though the car has been returned.
Yes, it is. The examples above are all from real cases, and while the result outlined above does not always follow, the starting point is that confiscation is ‘draconian and intended to be draconian’.
Certain convictions trigger what are known as ‘lifestyle provisions’ which means that your finances going back many years will be subject to investigation – unless you can establish that the income was lawfully obtained, the monies will be at risk of being added to the ‘benefit’ figure.
I haven’t got any money, so I don’t care
Sure, but the benefit figure will still be determined, and if for example, you come into some money at a later date (for example an inheritance or pension), the prosecution can seek to take that money from you. Any property of value can be seized in order to satisfy a confiscation order, and if the court believes that you can pay the order, and you fail to do so, you can be sent to prison in default.
It all sounds rather complicated
It is, and we haven’t even mentioned gifts, hidden assets, corporate veils and A1P1 considerations.
Often the real punishment felt by an offender is not the headline sentence but the financial penalty that flows from a confiscation order.
The rules are incredibly complicated, and we often find fundamental errors and assumptions being made by financial investigators. Basic errors can result in wrongful calculations amounting to many tens of thousands of pounds.
In some cases, we can argue that the making of a confiscation order is so disproportionate that to do so would be unlawful.
So, before entrusting your case to any other solicitor ensure that they are up to speed not only on the basics of the offence with which you have been charged, but also in relation to confiscation.
John Howey, Senior SolicitorRead More
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‘Follow the money’ is a rather clichéd line from the film ‘All The President’s Men’ which charted the scandal that engulfed President Nixon in the 1970s.
But even today, the money trail is very much the first line of investigation in serious fraud cases, and one that is increasingly difficult to follow.
Not so long ago, the ways of committing fraud were somewhat limited and for that reason also somewhat simplistic.
That can no longer be said, as financial markets spanning the world transfer billions of pounds during each hour of trading. Bitcoin and other emerging ‘crypto currencies’ complicate the picture even more.
Swaps, derivatives, forwards, securities, bonds, secondary markets… We could go on and on…
Why does this matter?
It matters to us as lawyers, as a mere understanding of the law is not enough for the successful defence of these complex cases, your lawyers must understand first and foremost the environment in which the crime has been said to have been committed.
Your lawyer must confidently speak ‘your language’
What is shocking, however, is that in a recent high profile case a purported expert witness for the prosecution was so out of his depth that he had to ask advice on basic financial terms.
The Court of Appeal observed:
“It’s not a matter to be downplayed when the Crown in a major prosecution calls a witness who is wholly out of his depth.
We take a very serious view of what in the judgment we will describe as a debacle, whatever the outcome.
We want to know how did it come about that he was instructed when he lacked expertise? We are very concerned as to how he can have been instructed, the due diligence, and how it came to light.
We are troubled by it.”
This particular witness was exposed by what has been described as a ‘devastating cross-examination’ by a defence barrister.
While the appeal courts are there to correct mistakes, it does not mean that every trial error will result in acquittal.
It is therefore vital that things are right the first time.
This requires a defence team who truly understand the business of international finance, who can unravel the complexities of your case, and can work as a team with top advocates capable of ‘devastating cross-examination’.
John Howey, Senior SolicitorRead More