A consultation designed to tackle offences related to small business tax evasion has been launched by HM Revenue and Customs (HMRC). The consultation will deal with tax evasion cases in the UK.
The proposed ruling is aimed at holding companies liable for criminal offences if they will fail to prevent their staff from committing tax evasion crimes. This is due to increasing pressure on the government to make tougher stances to curb tax evaders. The growing pressure due to Panama Papers Leak which shows tax evasion and the state of the national economy has made the pressure even more for the government to impose stiff penalties on tax evaders.
HRMC fears of companies easily blaming their staff for tax evasion which can make the companies escape tax evasion wrong doing. This can make it easy for companies to break UK tax rules while blaming their staff.
The proposed rules will make the companies show measures which they took to prevent their staff from committing tax evasion crimes. The companies should put measures in place to avoid cases where their staff will abet, aid or procure tax evasion abroad.
In previous cases the prosecutors were required to show senior members of the company such as board of directors really assisted their clients to evade tax so that the company can be held liable for tax evasion offences.
In the consultation document, HMRC said the existing law can act as an incentive for the senior members to turn a blind eye on tax evasion crimes which will be committed by junior members. The senior members can turn a blind eye as a way of shielding the company from tax evasion charges. In the existing law the cooperation will not be held liable if the senior members of the organisation are not aware of the tax evasion activities carried out by junior members. This will even prevent junior members from pointing out the crimes in their organisation.
The existing law acts as a disincentive for internal reporting. The suspected illegal activities can be hardly reported to senior members of the corporation due to fear of holding the company liable for the illegal activities.
The banking sector has adopted a similar approach already. Bosses of failed banks will be required to demonstrate they were responsible in their running of banks which failed.
The law is very clear to bosses. They should remain fully aware of what their juniors are doing in the organisation. They will not absolve themselves from any charges which will be raised due to activities which were performed by their junior managers. The law will require them to take full responsibility if there are any legal charges raised against the corporation.
The Prime Minister David Cameron revealed that there will be a launch of a new taskforce which will be headed by HMRC in corporation with the National Crime Agency. The prime minster also stated that the taxman was following up more than 700 leads which are linked to Panama Papers Leak.