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THE RIGHT WAY TO REPORT A COMPANY’S FAILURE TO PREVENT THE FACILITATION OF TAX EVASION

May 2019 - Crime. Legal Developments by Rahman Ravelli Solicitors.

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Self-reporting such a failure can be used as part of thecompany or partnership’s reasonable procedures defence if it is charged with anoffence. It can also be taken into account by prosecutors when making adecision about whether to prosecute and can be reflected in any penalties thatare imposed

It is important, therefore, to ensure that self-reporting isconducted correctly.

In its guidance, HMRC states that those making the reportshould only give basic details about the organisation’s prevention proceduresto prevent the criminal facilitation of tax evasion. The report should notinclude the organisation’s full prevention procedures. These may be sought byHMRC after the report has been submitted.

HMRC makes it clear that anyone making such a report musthave the authority to do so from the company or partnership that the report isabout – and the report should only relate to that organisation’s failure toprevent the criminal facilitation of tax evasion. A person, it is emphasised,should not make a report about a company or partnership’s wrongdoing if theyare not authorised to do so and such reports should not be used to reportforeign offences; which should be reported to the Serious Fraud Office (SFO).

The person submitting such a report should only give the informationthat they already have and should not take it upon themselves to find out morethan they already know.

The guidance also states that the person submitting a reportshould not encourage anyone to either commit or continue committing a crime toget more information or continue committing a crime themselves in order to gainmore information

If a person has been authorised to send a self-report onbehalf of a company or partnership, HMRC recommends the sender does not tellothers that they are sending a report. But the person should inform the HMRC ifany of the information in the report has been provided by someone else.

The Contents of a Report

The report must give details about the criminal facilitationthat the company or partnership failed to prevent and any tax evasion that mayhave taken place as a result.

While the HMRC guidance outlines in detail the dos and don’tsof such a report, it does stress that such self-reporting is voluntary. Acompany or partnership has a right to remain silent and can also decide foritself how much information should go in the report.

But when self-reporting, however, HMRC expects you to supplythe company’s name, address, Companies House registration number (if it hasone) and its Unique Taxpayer Reference (if applicable). If the organisation isnot UK-based, HMRC requires its registration number in the country where it wasformed, the submission references of any previous self-reports made to HMRC anddetails of reports made to any other agencies relating to this incident (suchas a Suspicious Activity Report).

HMRC will also require any report to detail how the taxevasion was facilitated. This should include who in the company facilitated it,what capacity they were acting in, what tax was evaded, how this was discovered,an estimated date for when it ended (if it has), an estimate (if possible) forhow much tax was evaded and an overview of existing prevention procedures.

While the person who sends the report will not be guilty offailing to prevent the facilitation – even though they are self-reporting onbehalf of the company or partnership - it should be noted at all times that theymay be guilty of a criminal offence if they give either false information orinformation that they do not honestly believe to be true.

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