HMRC is increasing its enquiries into the facilitation of tax evasion, having opened 13 new Corporate Criminal Offences investigations.

As of 13th October 2020, 31 potential cases, 13 live cases and 18 live opportunities were under review. These cases are across 10 different business sectors, and a variety of business sizes and types.

First introduced in September 2017, the Corporate Criminal Offence (CCO) makes it a criminal offence for a business to fail to prevent its employees or, associated people (i.e. contractors, supply chain members, agents etc.), from facilitating tax evasion. A successful prosecution could lead to substantial fines, and reputational damage.

In the event of a HMRC investigation, businesses would need to be able to prove that they have ‘reasonable prevention procedures’ in place to prevent the facilitation of tax evasion from taking place, in order to avoid prosecution.

Whilst in the first few months of the COVID-19 pandemic, HMRC focused on implementing government funding support packages, HMRC has now increased the number of investigations into businesses suspected of CCO’s.

HMRC are also concerned that up to £3.5billion of furlough claims are fraudulent, or paid in error, which is a likely reason for this increase in investigations.

Businesses should review policies and procedures

This increase in investigations by HMRC should be a reminder to businesses that the CCO offence should not be ignored and reasonable internal procedures should be in place to guard against the risk, especially if you are likely to sell your business in the near future or you feel that any adverse publicity arising from a successful prosecution will fundamentally affect your business in terms of market perception, or if you work with government agencies.

When the CCO was first launched in 2017, businesses were urged to introduce procedures by undertaking risk assessments and putting policies and controls in place in order to ensure tax avoidance cannot be facilitated by their employees or associates.

It is clear that HMRC have been delayed in their response to this legislation but now they appear to be investing significant resource to pursuing prosecutions and the unlimited penalties that can apply to businesses.

It is vital that businesses review their procedures in order to ensure they have a firm defence in the event that an investigation occurs, and with the number of CCO cases due to increase further, now is the time to consider if professional assistance is required to mitigate any risks.

If you have any concerns regarding HMRC investigations, or questions regarding how to put procedures in place to mitigate against a potential investigation, please get in touch with a member of our specialist tax team.