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Corporate criminal offences - HMRC's renewed focus on tax investigations

Penny Simmons comments on HMRC’s focus on tax investigations despite the pandemic.             
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    The Revenue is stepping up its inquiries into tax avoidance across a number of business sectors. HMRC had cut the launch of new tax investigations by more than half after the pandemic first hit the UK, concentrating instead on implementing the government’s Covid-19 support plans. The FT reports on a freedom of information request showing how, since July, the Revenue has re-focused its efforts on compliance. In that month alone it opened 14,000 new investigations, an increase of 40 per cent on June’s activity. The Revenue's chief executive, Jim Harra, has pledged a campaign to recoup money wrongly paid out through the government's Covid-19 support packages due to fraud and error — that is estimated to be around £3.5bn. The Revenue's focus on corporate crime is something we had noticed some time ago. A reminder - corporate criminal offences, CCOs, were introduced in 2017 and make it a criminal offence if a business fails to prevent its employees or agents from facilitating tax evasion. It can lead to an unlimited fine and a criminal record for a business, restricting its access to some regulated markets and its ability to bid for government contracts in the UK and overseas.

    Back in August  litigator Andrew Sackey said the fact that investigations are continuing, and indeed increasing, amidst the pandemic shows the importance of the CCOs to HMRC as it tries to influence corporate behaviour and combat tax evasion across supply chains. That was towards the end of August, so has anything changed since then? It's a question I put to tax specialist Penny Simmons: 

    Penny Simmons: “To be honest with you, nothing's really changed from August - my message is very much the same.  The CCOs, the corporate criminal offences, they are not going away and as much as I totally appreciate that businesses are under a huge amount of pressure at the moment with everything that comes with the Covid-19 pandemic tax risk, and ensuring that you have reasonable prevention procedures to prevent someone, either one of your employees or someone that you work with, facilitating tax evasion remains a priority and the Revenue have been very clear that they are expecting businesses to have reasonable prevention procedures in place. What does that mean? Well, in a nutshell, that means that they have procedures and policies in place to prevent somebody, one of their employees, somebody that they work with, to prevent somebody and helping somebody else evade tax and preventing tax evasion remains a key priority for HMRC, in fact even more so in these times. So although businesses are under huge amounts of pressure, it isn't something that a business should ignore and if it is something that the business says well, you know, I dealt with this back in 2017, I did a risk assessment, I looked at my policies and procedures, I changed my controls to make sure that the nobody working for me working with me could facilitate tax evasion, I did that in 2017, I don't need to worry about that. One of the key takeaway points that I'm often stressing to clients is that in order to have reasonable prevention procedures, the Revenue has been very, very clear that they expect the business to monitor and review its control procedures. So we're now moving towards the end of 2020. We are just over three years since the CCOs were introduced, so if you haven't looked at your control procedures since 2017, for three years now, I say it is it is well time that you undertook some form of a review to check that those controls are operating as intended.”

    HMRC has just published the latest figures on its current CCO investigations. As of last week, it has 31 potential CCO cases underway – that's made up of 13 live investigations with a further 18 "live opportunities" under review. They span 10 different business sectors and sit across all HMRC customer groups from small businesses through to some of the UK’s largest organisations. 

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