The Criminal Finances Act 2017, in force from 30 September, introduces a new criminal offence of failure to prevent the facilitation of tax evasion. Stuart Adams provides an update
The Criminal Finances Act 2017 (CFA 2017) introduces a wide range of measures to fight crime, of which one of the most important and widely drafted is the introduction of new criminal offences of failure to prevent the facilitation of tax evasion.
Not ringing any bells? Like Big Ben, you are not alone. Sixty-three per cent of attendees at this year’s Private Client Section annual conference had not heard of the new criminal offences, notwithstanding that the act comes into force on 30 September.
The new law will make it much easier to convict law firms for the facilitation of tax evasion, domestically and abroad, by its partners, members, directors, employees, agents and anyone who performs services for and on behalf of law firms. The CFA 2017 imposes strict liability, to which one defence alone exists: that the firm can show that it has put reasonable prevention procedures in place.
The scope for liability is enormous. It could conceivably cover foreign tax evasion facilitated by an overseas lawyer you instruct on behalf of your client to provide tax advice. Equally, it could flow from domestic tax advice you procure from an accountant to complement your own succession planning advice. With the risk of criminal liability, unlimited fines and considerable regulatory and reputational damage at stake, no law firm / practitioner can afford to ignore the legislation. Moreover, private client practitioners offering tax and wealth structuring advice are considered to pose a higher risk of facilitating tax evasion and, as such, the procedures that they must put in place will be more substantial.
In a forthcoming article for the November edition of PS, I will summarise the new offences, consider typical private client scenarios and the prevention measures that law firms and practitioners should have in place so that they can, should it prove necessary, avail themselves of the defence.
The Law Society published a practice note on the CFA 2017 on 8 September 2017