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What is the Criminal Finances Act 2017?
In the past, the directors of larger organisations have been able to wriggle out of personal responsibility for the tax evasion acts of their employees and other associates if they can plead ignorance of the act.
This “turning a blind eye” excuse has irritated legislators and as a result we now have the Criminal Finances Act 2017 (CFA).
From 30 September 2017, the new CFA ensures that companies and partnerships are criminally liable if they fail to prevent tax evasion by their employees or an external agent. This is true even if the business was not aware of the tax evasion activity. The CFA is targeted at legal entities, not a natural person, and as such, it will mainly affect limited companies and partnerships.
This does raise the possibility that directors and partners will be held criminally liable for the tax evasion activities of their employees, agents and sub-contractors, even though they may have no knowledge of their criminal actions.
The only practical way in which affected businesses can defend against this legislation is to assess the risks and set up effective controls to minimise any risks disclosed.