Criminal Finances Act 2017

On the 30th September 2017, new laws came into effect meaning that recruitment agencies, (and other businesses) could face criminal charges and hefty fines if they fail to prevent the facilitation of tax evasion. A month on from the release of these changes, we felt it appropriate to remind everyone of the potential associated implications.

The latest changes to the Criminal Finances Act could have potential major implications in the recruitment industry if not adhered too. As an example; in the recruitment sector, a recruitment agency could be penalised if one of their employees has in some way facilitated tax evasion. The new laws stipulate that an organisation could even be prosecuted if there is no evidence supporting any financial gain to the organisation. This is true even if the organisation were to be unaware of the actions of their employee – or an associated person.

Exactly what has changed?

Two new offences have been introduced;

  1. The failure to prevent the facilitation of UK tax evasion offenses (section 45)
  2. The failure to prevent the facilitation of tax evasion overseas where such evasion is criminal under local law (section 46)

What counts as an offence?

There are 3 main stages which constitute an offence:

  1. There must be criminal tax evasion by a taxpayer.
  2. Criminal facilitation of the tax evasion by an associated person of the relevant body.
  3. The organisation failed to prevent its representative from committing the criminal facilitation.

Who counts as an associated person?

The law states that an associated person is a person that is an employee, agent or any person who performs services directly for or on behalf of the relevant body. An associated person can be both an individual or an incorporated body.
In the recruitment sector, an associated person could include payment intermediaries such as Umbrella companies, CIS Contractors and other similar third-party companies. Recruitment Companies could also be included in this in respect of the services that they provide to clients.

What are the potential penalties?

The criminal penalties for engaging or facilitating tax evasion will include;

  • Unlimited financial penalties.
  • Ancillary orders such as confiscation orders or serious crime prevention orders.
  • A criminal conviction placed against the organisation and the reputational and financial consequences of this.

What can recruitment agencies do to protect themselves?

The changes in the law do create an additional obligation on a recruitment agency to take what are described as ‘reasonable preventative measures’. Such measures might include;

Read up on the new laws and take the time to gain further understanding on the changes and what the potential repercussions could be of falling foul. Should you have any concerns about these changes or your understanding of the Criminal Finance Act 2017, seek further professional advice.

Undertake a risk assessment of your business processes. Educate staff on the implications relating to the changes and how non-compliance could impact on the organisation. Review processes within your organisation and identify any potential areas of weakness that could potentially leave you vulnerable. Then make plans to tighten up on these areas.

Review the supply chains and preferred supplier lists you currently have in place. It is now more important than ever to ensure that your preferred supplier list only includes fully compliant and trustworthy businesses that you trust and that you are confident will act professionally. When reviewing umbrella, payroll or other third-party company suppliers, consider reviewing any expenses policies still in place with those companies as well as any models that appear to promote an unusually high take home pay for workers. Some companies will still be facilitating the payment of expenses and passing liability to your organisation. If you are unsure seek further professional advice.

Our Promise

When Working with Quest Pay Solutions, you can be assured of the following;

  • Every payment made in line with the National Minimum Wage (NMW) and the National Living Wage (NLW).
  • No expenses processed ensuring zero potential risk or dispute over wrongful tax relief being processed.
  • Complete transparency in the way in which we operate – our agencies are always welcome to come into our offices and see our processes being followed.
  • No underhand ‘too good to be true’ payment models involving schemes such exploitation of flat rate VAT rules or Employers allowances.
  • We’re on hand to help when you need us – We actually pick up the phone when our clients and contractors need to get hold of us unlike many companies operating in this space.

If compliance and an honest service are at the top of your priorities, contact Quest Pay Solutions. We don’t take risks with your business.

Call 01244 555 123 for a confidential discussion today!

Please feel free to share this information about the Criminal Finances Act with your network.