We are delighted to announce the launch of the S&W Sessions - a regular series of thought provoking hot topic webinars that are relevant to your business.
Please join us for the first exclusive webinar to discuss the latest news and views on Corporate Criminal Offence for facilitation of tax evasion and a fresh look at Research & Development “R&D” tax credits.
Join Tom Shave and Justin Arnesen (R&D Specialist) to hear about the latest developments on Corporate Criminal Offence, how R&D tax claims work and what the future may hold. Both Tom and Justin will provide key points on each subject so you can be better informed and more prepared.
The webinar will cover the following areas:
- Corporate Criminal Offence
- Recap on what is CCO and who does it affect?
- What’s the latest on CCO from HMRC?
- What should organisation’s be focusing on now?
- E-learning and on-going monitoring?
- Research & Development Tax Credits
- What is R&D tax?
- What costs qualify for R&D tax relief?
- How we can help maximise your claim?
- Key takeaways
Who should view the webinar?
C-Suite executives; CFO, CIO, CCO, COO, Heads of Tax, Tax Managers, Innovation Directors, Commercial Directors
Overview of new rules
HMRC have introduced new corporate criminal rules in relation to the facilitation of tax evasion
- Includes charities
- Introduced by Criminal Finances Act effective from 30 September 2017
- Applies to all businesses that fail to prevent the facilitation of tax evasions by employees or ‘associated persons’
- The rules cover both UK and overseas tax evasion
- Banks to face criminal charges for allowing tax evasion
- UK uses Criminal Finances Act to seize £350m from bank account
- HMRC unmasks the £30m tax evaders - including a hairdresser and takeaway owner
- HMRC loses £16bn a year through tax evasion and fraud
- HMRC empowered to name and shame tax evasion 'enablers‘
- 27 large companies referred to HMRC’s tax evasion unit in 2017-2018
Three key steps must exist for an offence to be prosecuted
Stage 1: Tax evasion offence
Criminal tax evasion by a taxpayer (either individual or entity):
- Any offence of cheating the public revenue, or
- Any offence where you are knowingly involved in or taking steps with a view to the fraudulent evasion of tax
- Applies to both UK tax evasion and foreign tax evasion.
Stage 2: Tax evasion facilitation
Criminal facilitation of this offence by “associated person” of the corporation:
- Associated person must deliberately and dishonestly take action to facilitate the taxpayer-level evasion
- If associated person is only proved to have accidentally or negligently facilitated tax evasion offence then the new offence is not committed by the relevant body
Stage 3: Failure to prevent facilitation
The entity failed to prevent its representative from committing the criminal act at stage 2:
- The only defence the organisation has is that it had reasonable procedures in place to prevent Stage 2
- There does not need to be a conviction for either Stage 1 or Stage 2 for the third stage to be present.
Who is an “associated person”?
- Someone (individual or entity) who is performing services for or on behalf of the entity when the tax evasion facilitation offence takes place.
- This can include, but is not limited to: Employees, Agents, Contractors, Subsidiaries, Referees, Outsourcers, Introducers, Suppliers, Joint Ventures
- The associated person must commit the tax evasion facilitation offence in the capacity of an associated person
- e.g. where an employee criminally facilitates tax evasion personally, outside of work duties, they commit a tax evasion facilitation offence but NOT in the capacity of a person associated with the employer.
- In this situation, the employer does not commit the new offence.
UK tax evasion facilitation offence
- A LLP engages with Contractor B for the provision of UK services.
- Sub-contractors engaged by Contractor B to carry out works for A LLP, deliberately fail to declare all of their income for UK tax purposes.
- Contractor B makes payments to sub-contractors in cash.
- A LLP needs to demonstrate that it has reasonable procedures in place:
- risk assessment,
- specific contract terms,
- due diligence procedures,
- ongoing monitoring/review.
Foreign tax evasion facilitation offence
The foreign tax evasion facilitation offence can only be committed by a:
- UK incorporated entity such as a limited company incorporated under UK law; or
- Corporate entity carrying on a business or other undertaking from a permanent establishment (“PE”) in the UK; or
- Corporate entity whose associated person is located within the UK at the time of the facilitation offence, such as a German company whose employee helps another person to commit a foreign tax evasion offence when in the UK.
Protection and penalties
Reasonable prevention procedures
- Critical to undertake a risk assessment to determine impact on business and prepare implementation plan
- Procedures designed to prevent people associated with the entity from committing UK or foreign tax evasion facilitation offences
- Potentially unlimited fine
- Implications for regulated entities eg losing licenses, additional restrictions
- Potentially prevented from bidding for public contracts
- Reputational damage
How will HMRC investigate?
- HMRC only needs to hold a suspicion in order to commence an investigation
- HMRC are receiving significantly more information under the Common Reporting Standard (CRS) reporting
HMRC guiding principles
- Risk assessment
- Proportional prevention procedures
- Commitment from senior management
- Due diligence
- Communications and training
- Monitoring and review
- Rapid reporting can form part of entity’s defence
- Rapid reporting can result in reduced penalties
- Regulated sector – may also be required to file Suspicious Activity Report to the National Crime Agency
- Before reporting, seek legal advice
An important component for all businesses to undertake urgently.
- Identify associated persons
- Evaluate and document key risks
- Understand and document key stakeholders
- Document findings and recommendations
|Developing a risk framework|
|Training and communication|
|Monitoring and review|
R&D Tax Incentives
R&D takes place when a company seeks to advance a field of science or technology through the resolution of scientific or technological uncertainty.
- Processing times – claims taking significantly longer than expected
- Quality of technical reports that are being submitted
- HMRC will be launching awareness campaigns
- New software guidelines to be released in 2019
- Advance Assurance – low uptake
- Proposed creation of a new innovation forum – all incentives not only R&D tax
How we can help?
1. Feasibility assessment
- Raising profile of R&D within the business
- Use as a tool to open dialogue with HMRC
- Consideration of R&D relief vs R&D Allowances
2. Health-check of previous claims
- Review existing claims
- Identify opportunities for enhancement
- Identify risks
- Submit amended returns
3. Planning for future R&D spend
- Review of commercial arrangements
- Classification of outsourced activities
- Tax efficient structuring
- Cash flow forecasting
4. Preparation of R&D claims and submission to HMRC
- Analysis of projects to determine qualifying expenditure
- Liaison with technical experts
- Preparation of report to support the claim
5. Dealing with HMRC enquiries
- Support in resolving enquiries quickly
- Strong relationship with HMRC R&D teams
- Tax Investigations Service to insure against fees on enquiries
Added Value over time
As we get to know your business, and as your business becomes more familiar with R&D incentives, we believe that we can add value from a strategic management perspective.
|Reduce Risk||Refine Process||Forward Planning||Legacy|
Register for the next S&W Session