date posted: 21-09-2017

From 30th September 2017, new rules will be introduced that will aim to prosecute corporations involved in the ‘facilitation of tax evasion’ and/or employees providing recommendations for suppliers under the expectation that tax will not be paid at the correct rate.


It will be up to businesses to demonstrate that they have the appropriate procedures in place to prevent tax evasion from occurring. This will ultimately have an impact on the use of Preferred Supplier Lists, particularly in relation to recruitment agencies in which consultants must comply with new company guidelines.


Why are new laws being introduced?


Whilst tax evasion and the facilitation of such matters is a criminal offence, organisations or partnerships are often not prosecuted as it is difficult to attribute accountability. In light of recent tax scandals, such as the Panama papers, tax evasion and avoidance has been a topic of much consternation amongst the UK public.


What counts as an offence?


There are three points that will attribute to committing an offence of tax evasion within a recruitment organisation, these are:


  1. 1) Tax evasion has been committed by a tax payer under existing law (e.g. a contractor)
  2. 2) An associated person of an organisation has facilitated in the offence of tax evasion (e.g. a recruitment consultant)
  3. 3) An organisation has failed to prevent said offence at stage 2 (e.g. the recruitment company itself)

It is worth noting that a company, such as a recruitment agency, can be found liable without any evidence that the organisation actually benefited in any way from the offence. Under the new law, a business could be guilty of a criminal offence if an employee or other associated person facilitates another person’s tax evasion. This could mean an offence has been committed even if the senior managers of a business were not involved or in any way aware of what was going on. The concern for recruiters and other corporations is that this places an additional burden on businesses to ensure they have prevention procedures in place. 


How to incorporate new rules into a recruitment agency?


The ‘Bribery Act’ outlines a number of principles that also go hand in hand with these rules; by following these guidelines recruitment agencies are more likely to have a solid defence should tax avoidance or evasion occur, these are:


  1. 1) Risk assessment
  2. 2) Proportionality
  3. 3) Commitment from top level
  4. 4) Due diligence
  5. 5) Communication and training amongst staff
  6. 6) Monitoring and review procedures

What are the consequences?

Should an incident of tax evasion occur within a business, the only defence that said business can use is that it had reasonable procedures in place to prevent matters like this, therefore businesses must be prepared in advance for these new rules to be introduced.


Failure to have procedures in place could result in criminal prosecution and unlimited fines. 


Read more about new tax evasion rules here


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