Tax evasion - is a criminal offence for companies the answer?

12 April 2016

George Bull 

Yesterday in Parliament, the Prime Minister announced that the Government would bring forward plans to introduce a criminal offence for corporations that fail to stop their staff facilitating tax evasion.

The policy was first unveiled under the Coalition Government in March 2015 by the then Chief Secretary to the Treasury Danny Alexander. So while this isn’t exactly a new initiative, its sudden reappearance in the wake of the Panama Papers revelations smacks of political expediency - and we know from bitter previous experience that tax law enacted in haste can often be regretted at leisure. 

Yesterday’s announcement provided precious little in the way of detail but a consultation held on the proposal last year threw up a number of concerns from respondents which focused broadly on three issues:

  • those persons whom a corporation can be liable for;
  • the geographic scope of the offence; and
  • the procedures that a corporation will be expected to put in place to try and prevent those representing it from criminally facilitating tax evasion.

At a very simple level, it’s hard to see how the law would work in practice. If a company representative provides bona fide advice to a client who then contradicts that advice and engages in tax evasion, who is then liable – the employee, the company or the individual? We await further detail with interest.

If you would like to discuss any of the points raised further, please contact George Bull or your usual RSM contact.