Ben Proctor reflects on recent reports of HMRC’s apparent inactivity
HMRC has received some criticism in the press this week after a Freedom of Information request by the Bureau of Investigative Journalism and TaxWatch confirmed that HMRC is yet to bring a single charge of the snappily titled corporate criminal offence of failure to prevent the facilitation of tax evasion (or “CCO” for short!) under Criminal Finances Act 2017.
CCO is in principle a very robust power, reaching across borders, into almost every aspect of a company’s activities and carrying unlimited fines as a potential sanction. However, the lack of prosecutions over a period of almost 7 years now since its introduction has prompted concerns that this powerful tool has been effectively left on the shelf gathering dust by HMRC.
In a recent article in The Guardian, Dan Neidle makes the insightful point that even if HMRC is leveraging CCO to reach strong and appropriate settlements “behind the scenes”, such use of the power will never exploit the powerful public deterrent effect that a successful prosecution would bring. This has two effects - companies, primarily large multinational groups, who were early adopters of CCO compliance measures have allowed this early good work to languish and atrophy. Meanwhile, the majority of small and medium sized companies are almost certainly still yet to take any meaningful measures specifically in respect of CCO.
This is a huge waste and opportunity cost for HMRC and for the UK public finances. The risk review, which is key to providing companies with a robust reasonable procedures defence in the event of facing a charge under CCO, has the powerful collateral effect of providing companies with the perfect opportunity to improve, integrate and consolidate their financial risk controls. This has brought valuable benefits to companies who have engaged proactively quite apart from the primary CCO defence. But at a national and a tax system wide level, the effect of energising engagement with CCO through one or more successful prosecutions could be a genuinely significant reduction in the loss of tax revenues to evasion. It remains to be seen whether the criticism of HMRC’s apparent lack of activity will prompt a change in HMRC’s strategy and an increased focus on the CCO regime as part of their compliance activity.
If you are interested in hearing more about what your company, or your client company, needs to do to become CCO compliant in a pragmatic way, avoiding excessive cost and disruption, please get in touch with Ben.
Ben Proctor 07821 639338
