The Corporate Criminal Offence (“CCO”) is defined in the Criminal Finances Act 2017 as a business’s failure to prevent the facilitation of tax evasion by one of its “associated persons”. According to the legislation, which came into effect 30 September 2017, an associated person is anyone performing services on the company’s behalf. With no de-minimis level for compliance, all entities must ensure they have sufficient policies and procedures in place to avoid falling victim to limitless penalties and reputational damage. Where HM Revenue & Customs (“HMRC”) conclude that tax evasion has been committed, there is also a risk of imprisonment as can be seen from many recent high-profile cases.
Time is of the Essence
HMRC anticipate £2.2 billion will be raised for HM Treasury by 2026 from investigations into tax evasion alone. In the first quarter of 2021, HMRC investigations have risen by 36% from the previous quarter. This is only expected to rise further following Rishi Sunak’s announcement of a further £280million of funds dedicated to HMRC resources in the 2021 Budget. With 28 CCO cases currently underway, it is important to note that a business’s compliance with the legislation does not apply retrospectively. Therefore, businesses are exposed from 30 September 2017 up until the point of implementation of a CCO policy supported by reasonable processes and procedures. For businesses who have not considered this already, the exposure to a limitless penalty increases day by day.
Assurance for Acquirers
As the M&A market begins to recover from the pandemic, CCO is becoming an increasingly important factor in providing assurance for acquirers undertaking commercial transactions and deals. It is vital that acquirers consider whether the business in which they are investing is CCO compliant as their failure to adhere to the legislation extends the risk of exposure to the acquirer. For this reason, CCO compliance is encouraged to avoid any issues or indemnities in the due diligence process.
How AAB can help
At AAB, our dedicated CCO team have experience of ensuring businesses are compliant with CCO and offer a range of packages to suit. We can provide expertise in identifying businesses associated persons and developing robust risk assessments which would strengthen the company’s defence in the event of a HMRC investigation. The CCO team is part of AAB’s wider Tax Investigations and Dispute Resolutions team, who are well placed to assist with not only CCO compliance but also any tax investigations, disputes, or disclosures.
If you would like to discuss CCO compliance or any other tax investigation matters, please get in touch with Helen Brown or your usual AAB contact.