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Criminal Finances Act 2017 is law from 30th September – Download our free guide

The Criminal Finances Act 2017 comes into effect on 30th September and introduces new rules to make it easier for HMRC to convict organisations who help, or fail to prevent, the facilitation of tax evasion.

This has the potential to have a significant impact on the contractor recruitment industry. Corporate bodies, including recruitment agencies, can now be held criminally accountable under a new offence of failure to prevent the facilitation of tax evasion.

Consequences this could have in a recruitment scenario

Example:

A recruitment consultant directs a candidate to the services of a payroll provider with the reasonable expectation that correct levels of tax are not being paid to HMRC (such as an Employee Loan Scheme). This is an act of facilitating tax evasion.

> Even if the agency management is not involved or even aware that this act has occurred, that is no defence. The agency could still be found guilty of preventing the facilitation of tax evasion. This new offence carries unlimited fines and a possible custodial sentence.

> The only defence from liability is for the recruitment business to verify that they have reasonable measures in place to prevent facilitation or that in the circumstances it would have been unreasonable or unrealistic to expect such measures to be taken.

Criminal Finance

4 steps to reduce your agency’s risk

The Criminal Finances Act effectively makes recruitment agency directors responsible for ensuring that no-one associated with their business facilitates tax evasion.
Don’t forget – management being removed from or unaware of breaches is not considered a defence.

Here are 4 steps recruiters should consider taking to mitigate their risk under the new rules:

Risk assessment
HMRC suggests that companies undertake risk assessments of their internal processes and procedures to identify any practices that could potentially be used to facilitate tax evasion.
These may include instances where staff are less than open about particular client or supplier relationships.

Procedures review
Your risk analysis will show any areas of your internal procedures and processes which need to be updated or fortified. These may include:

  • Demonstrating high-level commitment to preventing the facilitation of tax evasion
  • Inserting and enforcing clauses in contracts with employees and contractors precluding the facilitation of tax evasion and a requirement to report concerns
  • Providing staff training on identifying and preventing financial crime
  • Providing a safe whistle-blowing procedure
  • Monitoring, enforcing and reviewing prevention procedures on an ongoing basis.

Communication and training
As we touched on above, it is essential that all employees and other representatives of the business are aware of the company’s stance on preventing the facilitation of tax evasion and the seriousness of a breach. Training can either be carried out in-house or using a third party specialist.

Supply chain audit
For recruitment businesses, this legislation makes it more important than ever to know that your preferred umbrella and contractor accounting suppliers are above board. Using only fully-accredited FCSA member companies is an infallible way to ensure this. A list of fully accredited members can be found here.

Free Guide

As experienced compliance and risk management consultants to the recruitment industry, we are ideally placed to support agencies as they take the appropriate steps to comply with the Criminal Finances Act.

We have created a concise, useful guide to the new legislation and how you can effectively mitigate your risk.

Download Guide

 

 

 

 

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