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Criminal Finances Act 2017

Need to know facts about the Criminal Finances Act 2017.

Having been announced in April of this year, the Criminal Finances Act 2017 was officially enforced on 30th September. It is a legislation which contractors, recruitment agencies and all UK businesses for that matter must be aware of – not least because ignoring it could bring about prosecution, criminal charges and crippling fines.

While you’ve probably heard about the CFA 2017 act, which is designed to stop tax evasion, you might not understand the entire picture. So here’s the essential breakdown of the facts you really need to know.

View the full Criminal Finances Act 2017 legislation.

What are the Government’s goals with the CFA Act?

Typically, legislations will not be passed through unless there is a genuine reason for the ruling to be introduced. The Government set out the Criminal Finances Act 2017 as a measure to help combat the threat of tax evasion. It aims to do so in a similar manner to how the UK Bribery Act reduced the frequency of corruption.

Several recruitment agencies have raised questions as to whether the changes will actually prevent fraudulent activity though. And arguments suggest that it could well be tricky to prove wrongdoing at the very top of an organisation, even when it’s clear there has been non-compliance at a different level.

Despite initial and inevitable challenges stamping out tax evasion, many UK businesses believe the CFA 2017 act is a positive move in the crackdown against corporate crime. But given the CFA has only been in effect for a month or two, it may take some time for us to gauge the full picture.

Does the CFA Act 2017 mean there are new rules for tax evasion?

The Criminal Finances Act 2017 won’t alter the concept of tax payments or avoidance as such, and the boundaries as to whether someone has committed tax avoidance remain the same.

The new CFA legislation does however, add liability to the companies who have allowed tax avoidance to happen within their business – whether that’s through employees, associated people or third parties. Put simply, it requires UK businesses to put very careful thought into who they work with from now on.

Business owners and indeed contractors must now take greater responsibility for their own actions, along with the activity of the people they work for and with. Failure to prepare for the U.K. Criminal Finances Act can carry big repercussions which include being banned from bidding on public contracts.

With regards to individual criminal activity, the CFA 2017 has made virtually zero impact. But the priority should be to ensure that as a business your compliance isn’t dragged into danger by the wrongdoing of others. Allow this to happen and your reputation will quickly move south.

When can a firm be held liable?

A business can be held accountable when an employee or contractor commits criminal tax evasion that could have been prevented. Companies that can show they’ve established and adhered to preventive methods may be free from charges, but unsurprisingly the Government has high expectations around CFA 2017. This means the process could cause lengthy headaches for those involved.

Again, it’s important to remember that the illegal practice of tax evasion has not changed. As such, individuals are still to obey the rules set out by the Accessories and Abettors Act 1861. However, a company could be open to prosecution when they have facilitated the criminal activity under the new CFA Act. Those criminal activities could come from any associated taxpayer. If the business in question has been involved and failed to prevent the wrongdoing, they will be accountable under the Criminal Finances Act 2017.

What are the Government suggestions?

HMRC has detailed a host of preventive actions in a 48-page guide. It encourages providers to review all areas that could facilitate illegal tax evasion. Confirming that safe processes are being used to prevent wrongdoing is just the start. To show initiative, training should be provided to everyone involved.

Companies are also advised to create an environment where concerns can be raised. This also includes encouraging colleagues and contractors to share information in confidence.

Businesses and contractors that suspect wrongdoing has occurred shouldn’t only respond internally. They should additionally seek expert legal advice and consider speaking to the authorities too.

The final word on the Criminal Finances Act 2017.

Ultimately, companies and individuals operating compliantly have very little to fear. But businesses must take precautions and defend themselves against CFA 2017, or else possibly face very damaging financial and reputational consequences.

Should the CFA Act stop, or at least heavily limit tax evasion without harming innocent businesses, it will no doubt be considered worthwhile. If it manages to achieve similar levels of success as UKBA did, many will agree that is has been a positive move.

For more information, please take a look at our Criminal Finances Act Guide.