Aziz Rahman

Aziz Rahman of Rahman Ravelli

How to ensure your business doesn't fall foul of tax evasion

Aziz Rahman, of award-winning business crime solicitors Rahman Ravelli, explains how companies can meet the new obligations to prevent tax evasion under the Criminal Finances Act.

Tax has always been a thorny issue for those in business. Some of us think we pay too much while others are often looking for ways to minimise the amounts they hand over. In recent years, the issue of tax evasion seems to have leapt to the top of the authorities’ agenda. That has meant that those in business have had to become extra careful when it comes to their tax affairs.

And now, the Criminal Finances Act has placed a whole new set of responsibilities on those in business. The Act, which came into effect on 30 September, makes companies criminally liable if they fail to prevent tax evasion by either a member of staff or someone else acting on its behalf. A conviction under the Act can lead to unlimited financial penalties for a company.

It pays, therefore, to make sure you do not fall foul of it.

Without going into too much legal detail, the Act is significant because it means for the first time in UK law that the firm where tax evasion was committed can be criminally liable for it.  The Act makes it clear that a company is liable if there has been criminal tax evasion by a representative of the company and the company failed to prevent it.

The Act does not make change an individual’s liability for tax evasion: if the company’s representative commits tax evasion they can still be prosecuted as individuals under existing law. But the Criminal Finances Act does place a huge responsibility on companies regarding the activities of everyone working for or with them.


It is important to emphasise, however, that a company investigated under this Act does have a defence if it can show that it either had in place reasonable tax evasion prevention procedures or that it would have been unreasonable or unrealistic to have expected it to have had such procedures in place.

This defence at least gives companies the chance to show that they did nothing wrong and were not careless in allowing tax evasion to be committed. But it does mean that companies need to assess and, if necessary, modify their workplace practices to ensure that everyone working for them is subject to adequate monitoring. The Act places responsibility on companies and their senior staff to ensure there is no scope for anyone to commit tax evasion. This can be a particularly big responsibility if the company is large or has complicated working arrangements.

So what needs to be done? HM Revenue and Customs (HMRC) has produced a 48-page guide to the Act. But, in a nutshell, companies have to look at all aspects of their work to see what precautions can be taken. This means carrying out detailed risk assessments of the way they produce their goods or services, how they interact with clients, the rules that dictate the way the workplace functions and the way activities are carried out “in the field’’ by either staff or third parties.


Any aspect of a company’s activities could offer the scope for tax evasion. The Act now demands that companies do everything possible to reduce that scope. If this seems a daunting task, it can be worth seeking legal advice to ensure you go about preventing wrongdoing in a way that meets the Act’s requirement of reasonable prevention procedures.

Any risk assessment is only worthwhile if it then prompts the company to introduce or improve its procedures to minimise that risk.

Examples of such action include:

* Training staff to identify possible signs of tax evasion.

* Introduce a whistle blowing procedure so staff or other interested parties can raise concerns.

* Devising and introducing working methods that ensure all activities can be scrutinised by more than one person.

*Making it clear to trading partners, agents or other third parties that they are obliged to report any concerns of tax evasion.

* Regularly reviewing and, if necessary, updating of these procedures.

There is no doubt that the Criminal Finances Act has placed a huge responsibility to prevent tax evasion on those in business. It is now up to those in business to meet that responsibility.


Aziz Rahman is founder of Rahman Ravelli; a top-ranked business crime law firm in national and international legal guides.