The announcement comes after HMRC raised concerns about financial crime during the pandemic and publicised a whistle-blowing hotline only last month. It is very likely that criminal investigations and prosecutions will follow in the coming months. The combination of soaring financial pressures and unprecedented levels of state support caused by the COVID-19 pandemic has created a perfect storm for fraud. At the same time, with many people forced to work from home, businesses have never had such little oversight over their employees.
During this period of heightened risk, all businesses should ensure that they do not find themselves unwittingly committing corporate criminal offences under the Criminal Finances Act 2017. The Act was introduced in 2017 to impose criminal liability on those organisations who do not prevent their people from helping others commit tax evasion. There is a simple response to this unlikely eventuality; the only defense is having in place reasonable procedures to prevent any wrongdoing. These procedures all stem from a risk assessment having been conducted.
HMRC have announced a number of measures to target financial Crime
HMRC’s chief executive, Jim Harra told the treasury committee last month that there were various measures in place in order to try to manage the risk of abuse of the scheme. However he acknowledged that it was inevitable that it would be targeted by fraudsters.
The committee were told prior to the hotline being launched that HMRC had already received reports of employers abusing the scheme. It is perhaps not surprising therefore that the number of reports has risen sharply since the hotline was launched. Additional measures that HMRC propose to use include withholding and disallowing payments when they have reason to believe that the system was being abused. HMRC will also audit businesses to check that on line claims have been made correctly. It is important therefore that businesses keep records of claims being made and that staff are properly trained to ensure they are aware of the eligibility criteria.
Are your employees putting you at risk of Corporate Criminal Offences?
Abuse of the Job Retention Scheme is technically a tax fraud as the scheme gives rise to an exemption for National Insurance Contributions. Similarly, the risks of 'remote' working lead to an acknowledged lack of control and oversight that would ordinarily be in place in an office or working environment. You will not be able to police the risks but you do need in place measures to manage the risk that an employee is not doing something that incurs a criminal liability for you.
It has never been more important for businesses to focus on updating risk assessments looking at financial crime which reflect the dramatic changes that we have seen in working practices. Businesses need to ensure that any reasonable preventative measures that they have in place are still fit for purpose. HMRC previously announced that it will regard those businesses with no reasonable preventative procedures in place as automatically high risk, having established that many businesses had inadequate procedures in place even before the COVID 19 pandemic. The procedures will need to withstand a heightened level of scrutiny in the coming months as Job Retention Scheme claims are audited and reports to HMRC are investigated.
The CFA Toolkit Can help
We have developed a toolkit designed by our team who have a rare insight amongst accounting and law firms as they are used to advising and defending businesses facing tax related investigations and prosecutions by HMRC. The CFA Toolkit helps you develop your reasonable procedures and is hosted securely online and provides a cost effective, step-by-step solution for those businesses which currently have no or limited procedures in place. We are also able to help you implement the CFA Toolkit remotely given the circumstances.
Watch our short video for an overview of the requirements under the Criminal Finances Act and how the Toolkit can help here. If you have any further questions please do not hesitate to get in touch with Andy Brown or Nicola O'Connor in our Tax Disputes team.