Corporate Criminal Offence - Where are we now?.

Article | Jan Fachot | 5th April 2022

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Four and a half years have now passed since the concept of Corporate Criminal Offence (“CCO”) was introduced onto the statute books. This legislation was a follow up to The UK Bribery Act 2010 which introduced the offence of “Failure to Prevent Bribery”.

The drafting of the Corporate Criminal Offence legislation was deliberately broad and has a wide ranging extraterritorial effect. In its simplest form, the CCO formally criminalises the facilitation of tax evasion and holds businesses accountable for the actions of its employees and agents. With the potential for unlimited fines being levied, organisations should be taking note of these rules. Protection from prosecution can be achieved by undertaking a risk assessment of your business and putting in place relevant processes and procedures to prevent the facilitation of tax evasion.

Latest Statistics

Her Majesty’s Revenue & Customs (“HMRC”) have confirmed that as at 27 May 2021:

  • There were 14 live CCO investigations however, no charging decisions had been made
  • A further 14 live opportunities were currently under review. HMRC had reviewed and rejected an additional 40 opportunities
  • These investigations and opportunities span 10 different business sectors, including financial services, oils, construction, labour provision and software development

The investigations and opportunities sit across all HMRC customer groups with approximately a third covering some of the UK’s largest organisations.

What’s the impact?

Whilst this legislation has been around for a number of years, awareness continues to be low. Accordingly, many businesses are still unaware of the ramifications of non-compliance with these rules. Further, many businesses simply do not consider that the CCO legislation is relevant to them and therefore have not undertaken preventative measures or considered whether any changes to their operations are  required in response to this legislation. However, failure to take action in relation to these offences is very dangerous terrain for any business. Additionally, confirming compliance with these rules has now become a standard feature in the share sale agreement of corporate transactions. Non-compliance could slow the deal flow or even result in amounts due to the vendors being held in escrow.

Our earlier article ignorance is no defence, outlined the parameters of this legislation and how businesses can protect themselves from criminal prosecution. All business are required  to evaluate and assess their own responsibilities under the legislation and take appropriate action. Unfortunately there is no “one-size-fits-all” approach and each business must consider their wider relationships and the businesses with whom they contract. Best practice would suggest a complete review of your supply chain to ensure that your business is in the best position to put forward a “reasonable procedures” defence in the event of a potential prosecution.

The regulatory landscape has evolved such that  the burden of compliance rests directly with the management of the relevant business, irrespective of its size. The facilitation offences are strict liability, meaning that lack of knowledge or intent by the business is irrelevant. The implementation of reasonable controls and preventative procedures as well as documenting the steps taken is the only means of defence. Now is the time for every business, regardless of turnover, size or sector, to act.

How PEM can help

At PEM we are able to undertake the CCO risk assessment and provide clear written policy documentation to ensure compliance with this legislation. If you have any further questions regarding any of the issues raised above, please do not hesitate to contact us.

[1]  Source HM Revenue & Customs

About the author

Jan Fachot

Jan joined PEM in 2012 and is a Partner in our Business Tax team, providing tax advisory and compliance services to companies.