New Corporate Criminal Offences (CCO) legislation took effect on September 30, designed to overcome the difficulties in attributing criminal liability to companies and partnerships when their employees, contractors and other “associated persons” are seen to be facilitating tax evasion.

The legislation applies to all UK tax evasion, regardless of whether or not the entity is UK based or where the offence takes place. It can also apply to evasion of any overseas tax by UK resident entities or associated persons and entities with a UK permanent establishment where a company knowingly facilitates tax evasion. Prosecution could lead to an unlimited fine, a public record of the conviction and therefore, adverse publicity and significant reputational damage.

Proving a negative is often difficult but, for CCO, the key defence for any organisation is that it had “reasonable” procedures in place to prevent the facilitation of tax evasion, or that it was not reasonable for that organisation to have such procedures. HMRC’s guidance sets out six principles organisations should follow.

HMRC has made it very clear that the key first step is to undertake a risk assessment to determine where an organisation may be at risk from associated persons facilitating tax evasion. HMRC sees this as a critical step to demonstrate top level commitment to compliance. It is also vital for the organisation to demonstrate due diligence in the way the assessment is carried out and in developing reasonable procedures proportionate to the risks identified.

An organisation must be able to prove that this is not just a boardroom box ticking exercise by communicating procedures throughout the business and training all relevant staff. Finally, implementing a regular monitoring and review programme is the sixth pillar of building a robust defence against possible prosecution.

If you have not already carried out a risk assessment, one should be completed as soon as possible. You need to ensure that specific risks of tax evasion facilitation are identified, the controls in place documented and, where necessary, a plan put in place to mitigate those risks.

BDO has developed a robust risk assessment methodology, and can facilitate risk assessment workshops. Please contact peter.harrup@bdo.co.uk for practical help and advice.

•Peter Harrup, is a partner and SME tax specialist at BDO LLP.