The Criminal Finances Act 2017

Tax Evasion

Tax evasion is the illegal non-payment or under-payment of taxes, usually as the result of making a false declaration (or an omission of declaration) of taxes due to the relevant tax authorities.

By contrast tax avoidance as described by * HM Revenue and Customs (HMRC) is:

Tax avoidance involves bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce this advantage. It involves operating within the letter, but not the spirit, of the law.

Importantly, the corporate criminal offence of facilitation only applies to tax evasion. A third party must be found guilty of tax evasion before the Council can be found to have facilitated it.

Examples of Tax Evasion

• You become aware, in the course of your work, that a third party has made or intends to make a false statement relating to tax; has failed to disclose income or gains to, or to register with, HMRC; has delivered or intends to deliver a false document relating to tax; or has set up or intends to set up a structure to try to hide income, gains or assets from a tax authority.
• You become aware, in the course of your work that a third party has deliberately failed to register for VAT (or the equivalent tax in any relevant non-UK jurisdiction) or failed to account for VAT.
• A third party requests payment in cash and/or refuses to provide an invoice or receipt for a payment made.
• You become aware, in the course of your work that a third party working for the Council as an employee asks to be treated as a self-employed contractor, but without any material changes to their working conditions.

Acting in the Capacity of a Person Associated with the Council

The Council can only be guilty of an offence in this regard, if an

• employee,
• agent
• or other person who performs services for or on behalf of the Council, facilitates a tax evasion offence.

*Tax avoidance: an introduction - GOV.UK (www.gov.uk)

The associated person can be an individual or a legal entity.

Where an employee criminally facilities tax evasion in their private capacity they commit a tax evasion facilitation offence. In these circumstances, the Council would not be liable as an employer.

Similarly, a third party could be acting for multiple organisations. The offence is only committed where a tax evasion facilitation offence is committed by the person acting in the capacity of a person associated to the Council, that is undertaken ‘for or on behalf of’ the Council. Any activity of the associated person beyond that relationship, for example on behalf of another relevant body or carried out in their private capacity, as mentioned above, would not lead to liability for the Council.