Corporate Criminal Offences (CCO) is a piece of legislation that was introduced in December 2017 that is centred around criminal tax evasion and the role of all businesses within this. It was enacted, in part, to ensure that sufficient legislation covered businesses’ involvement within criminal tax evasion. Under Section 45 and 46 of the Criminal Finances Act 2017, tax evasion that is facilitated, or could have been preventable, by corporate entities is now a criminal office.
Scope of Legislation
The CCO legislation covers all UK corporate entities and corporate entities that have a connection to the UK. This means businesses from small to large and in all industries. Tax evasion referred to includes domestic tax evasion and international tax evasion.
What does the Corporate Criminal Offences Act mean?
In the event an ‘associated person’ criminally evades tax, or facilities criminal evasion of taxation, and the business in question is unable to demonstrate that it took sufficient steps to prevent such tax evasion, the business is guilty of a criminal office. Being found guilty of a criminal offence within the context of CCO can lead to unlimited fines, regulatory sanctions and other consequences such as reputational damage, loss of customers etc.
An ‘associated person’ refers to employees, suppliers, customers, agents, and anyone that is deemed to be acting for the business in some capacity. HMRC have made this definition deliberately broad to capture a lot of different players. The intention behind CCO legislation is, in part, to instigate cultural changes within businesses to seek to route out criminal tax evasion.
What should your business do?
One of the key elements behind this legislation is a requirement from all businesses to have sufficient internal controls to prevent criminal tax evasion. It is not sufficient to have purely strong internal controls, there is a requirement that you have specific controls surrounding CCO. Without CCO specific controls, it could mean that you would be unable to demonstrate that you have taken reasonable steps to prevent criminal tax evasion within a CCO audit.
If you are looking to take steps towards mitigating your risk exposure to criminal tax evasion and CCO legislation, please contact Sam Rose, who will be able to assist you.