Prosecution of ‘enablers’ of tax evasion - Laurence Lancaster

Laurence Lancaster, Barrister-at-Law, Group Head of Tax at Sovereign Group discusses prosecution of ‘enablers’ of tax evasion.

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1. Prosecution of ‘enablers’ of tax evasion.

Video transcript

1. Prosecution of ‘enablers’ of tax evasion.

you need to bear in mind where this piece of legislation has come from. It is actually born out of a government consultation on effectively looking at aggressive tax avoidance and tax evasion, and there’s been various pieces of legislation that have arisen out of that consultation of which this is obviously one. The first couple of points are that it’s a corporate offence. So it applies to corporates, not to individuals. Secondly, it extends to non-resident corporates. So it’s not just concerned with UK companies or partnerships. It extends to non-resident companies, non-resident partnerships. In order for this offence to apply, or where it does apply, you’re going to have three parties to it and they are effectively the ultimate lay person, the person who actually is going to commit the tax evasion, who we can refer to as Joe Blogs, who could be based anywhere. We’ve then got the associated person and finally we’ve got the relevant body. The relevant body is going to be the actual company to whom the associated person is going to provide services. So they’re the three key parties to this offence. Now there are two key offences under the legislation. One is the UK tax evasion offence and the other is the overseas tax evasion offence. And remember, the offence is the failure by the corporate to prevent the facilitation of this offence. So in relation to the UK offence, there are essentially three elements to it. You’re going to have the person who commits tax evasion, you’re going to have somebody who’s facilitated the tax evasion, and then you’ve got this relevant body, either the UK corporate or the overseas corporate who has failed to prevent the commission of this offence. It’s effectively going to be the guy who’s facilitated the tax evasion has done it while he has provided services to that relevant body and he’s either going to be an employee of it, an agent, or just somebody who provides services generally. Now that’s the UK offence. There’s also an overseas offence and it’s really an example, this legislation, of the UK imposing its legislation extraterritorially, because it’s looking, potentially, at tax evasion which has been committed in a foreign country by somebody who is not in the UK, not a UK resident person and potentially the relevant body can be non-UK resident as well. So effectively it’s extremely wide in its scope. Now in terms of what needs to be satisfied for this offence to be in point, it’s the same conditions as I’ve just set out, although the tax evasion is foreign tax evasion, not UK tax evasion. There’s an additional hurdle though for if you are an overseas company and that is that you’ve got to have either a UK branch, so a place of business in the UK, or the facilitation of the tax evasion has to have taken place in the UK. So they’re effectively the two core offences under this legislation. Now, the key defence in most instances is going to be prevention procedures that you’re going to have to have in place as a corporate in order to ensure if you are on the hook for this offence. So if those conditions I’ve laid down are satisfied, you’re going to have to fall back on this defence and it’s very much procedurally focused. So it’s looking at whether you’ve got in place a clear set of policies aimed at combating tax evasion, whether you’ve got training in place for staff, whether you risk assess clients, particularly for those bodies who are high risk. So we’re looking there at tax advisors, lawyers, and accountants, and those essentially involved in areas of business where clients are more likely to commit tax evasion.

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