How are professional advisers impacted by the Criminal Finances Act?

  • Written By: Andrew McKenna
  • Published: Mon, 14 Aug 2017 15:19 GMT

Recent legislation, including penalties for the enablers of offshore tax evasion or non complianceand the corporate offence of failing to prevent the facilitation of tax evasion2, means that tax advisers, accountants, lawyers, IFAs and many businesses, including those not directly associated with tax or finance, are now in HMRC’s sights.

Law Firm 113418340 Min72

In fact, all businesses and partnerships fall within the corporate offence in the Criminal Finances Act regardless of their trade or profession, some clearly with a higher risk profile than others.

Each will have to assess the risk and exposure to individuals within, or associated with, their businesses facilitating tax evasion. Procedures and training will need to be put in place to ensure the business is not caught out by the new legislation.

Businesses should not assume they are immune from this legislation. Areas that will need careful consideration include:

  • having an international client base
  • making payments to suppliers in cash
  • referring clients to third party linked service providers

Where a client of an adviser has committed a deliberate tax offence, HMRC will be looking into what that adviser did or didn’t do for the client.

The enabling offence can include a civil penalty for the adviser. It includes a failure to take action on the adviser’s part. The adviser’s penalty is based upon the client’s penalty and can involve naming and shaming by HMRC. It is clear to see how far reaching these new offences will be.

One area of difficulty is that the penalties applicable to the client and the adviser, are each reduced by either party providing information about the other. We may therefore see situations which may require advisers with clients who have committed deliberate tax offences to engage a specialist third party to deal with that enquiry to avoid any conflict of interest.

An adviser’s client can also accept an offer from HMRC to disclose a deliberate tax offence under the Contractual Disclosure Facility or choose to request that facility voluntarily. This would immediately mean that one of the requirements for the application of the corporate criminal offence is met. Investigations will then be made into the advisers to that client and the business itself to see if facilitation or enabling and corporate offences apply. Third party support is needed immediately in such cases.

All professional practices need to be aware of the new legislation and how it applies to their business and to their client base.

According to a survey3 recently carried out by Smith & Williamson, almost 45% of businesses polled are yet to start preparing for compliance, with nearly 40% claiming that the timeframe for complying with the rules is their biggest challenge. The new corporate offence legislation is coming into effect from 30 September 2017, so there is not much time to prepare and have reasonable procedures in place.

Smith & Williamson has an experienced team of experts who can assist advisers and their clients in these new areas of tax risk and exposure. If you would like more information, please contact us.

1. Schedule 20 FA2016

2. Part 3 of the Criminal Finances Act 2017

3. S&W client survey - July 2017

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Tagged with:

Tax, IFAs, Accountancy

Cookie Settings