Criminal Finances Act 2017

Tax evasion, and the deliberate and dishonest facilitation of the commission of tax evasion by another person, are criminal offences.  In response to the Panama Papers leak in April 2016, the Government created a law to apply to organisations where they fail to prevent their representatives from facilitating tax evasion.  

In September 2017, the Criminal Finances Act 2017 (CFA) came into force, creating two new criminal offences for organisations including the University of failing to prevent the facilitation of (1) UK and (2) foreign tax evasion offences by an associated person.

An “associated person” includes anyone working on behalf of the University (such as an employee or agent), including contractors, consultants and Joint Venture partners. Overseas workers, agents and activities are a particular risk.

Prior to these new offences being introduced, evidence that the most senior staff of an organisation were aware of and involved in the illegal activity was required to attribute criminal liability to an organisation. These new offences aim to ensure organisations are held to account for the actions of their agents and employees. 

Please note there is no de minimis limit for tax fraud.

If you have any concerns about the application of the CFA, please contact the Tax Team  or Financial Assurance team .

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The CFA places strict liability on the University for any failure to prevent a breach of the act. The penalty is an unlimited fine as well as reputational damage.

For the University to be found to have committed the corporate criminal offence, three things need to have happened:

  1. Criminal tax evasion by a taxpayer (an individual or a legal entity) under existing law (in the UK or overseas).
  2. The criminal facilitation of the tax evasion by an “associated person” of the University i.e. another person knowingly assists the evasion of tax.
  3. The University having failed to prevent its representative from committing the criminal facilitation act.

Definitions:

  • Tax evasion: a deliberate effort not to pay tax by an individual or legal entity (such as the University). 
  • Location: tax evasion in the UK means deliberately cheating HMRC out of tax due i.e. there is an element of fraud involved. Foreign tax evasion offences mean evading tax in a foreign country if that conduct is an offence in that country and would be a criminal offence if committed in the UK.
  • Facilitation: another person knowingly assists in the evasion of tax. It is a criminal offence for any associate of the University (including employees or anyone delivering services on behalf of the University) to facilitate tax evasion.

The CFA places strict liability on the University for any failure to prevent a breach of the act. The penalty is an unlimited fine as well as reputational damage.

The University therefore needs to put in place reasonable procedures designed to prevent the facilitation of tax evasion. The Government has suggested that policies and processes are put in place in line with six key principles:

  1. Risk assessment: the University assesses the nature and extent of its exposure to the risk of those who act in the capacity of a person associated with it criminally facilitating tax evasion offences. The risk assessment is documented and kept under review. 
  2. Proportionality of risk-based prevention procedures: reasonable procedures to adopt to prevent persons acting in the capacity of a person associated with it from criminally facilitating tax evasion will be proportionate to the risk the relevant body faces of persons associated with it committing tax evasion facilitation offences.  This will depend on the nature, scale and complexity of the relevant body’s activities.
  3. Top level commitment: top-level management should be committed to preventing persons acting in the capacity of a person associated with it from engaging in criminal facilitation of tax evasion.  They should foster a culture within the relevant body in which activity intended to facilitate tax evasion is never acceptable.  
  4. Due diligence: the organisation applies due diligence procedures, taking an appropriate and risk based approach, in respect of persons who perform or will perform services on behalf of the organisation, in order to mitigate identified risks. 
  5. Communication (including training): the organisation seeks to ensure that its prevention policies and procedures are communicated, embedded and understood throughout the organisation, through internal and external communication, including training.  This is proportionate to the risk to which the organisation assesses that it is exposed. 
  6. Monitoring and review: the organisation monitors and reviews its preventative procedures and makes improvements, where necessary. 
     

There are three simple responsibilities for people working in the University:

          1. Ensure you are aware of your responsibilities

  • Information is available on these pages.
  • Undertake the available training
  • Familiarise yourself with the case studies so you can recognise risky situation

          2. Always follow the relevant processes

The University has a number of policies, processes and tools in place that ensure that risks are addressed, including:

  • Employment taxes including the use of the HMRC Check Employment Status for Tax (CEST) tool to support the assessment of individual employment status and Personal Services Companies to ensure employment taxes are appropriately managed.
  • Research VAT treatment including the use of the VAT Research tool, to support the assessment of research income, costs etc. for appropriate VAT treatment.
  • Collaborator VAT treatment (included in the VAT Research tool) to support the appropriate identification of collaborative relationships versus supplier relationships to ensure correct VAT treatment.
  • Donations are managed to ensure appropriate due diligence is undertaken and donations are correctly accounted for.
  • The International Working Arrangements Policy is in place to ensure departments and employees have a clear understanding of their legal and financial obligations, including tax, when an employee intends to live or work overseas. 
  • The Gifts and hospitality policy is in place to ensure gifts are identified and any tax implications dealt with.
  • All University purchases to be made using University purchasing contracts, which  include a supplier certification of compliance with the Criminal Finance Act
  • When purchasing goods and services careful consideration should be given when selecting suppliers. Preferred and contracted suppliers should be used wherever possible as these are reviewed and managed by Purchasing. Where this is not possible departments should undertake appropriate supplier suitability checks.

          3. Report any concerns promptly

The University is committed to carrying out its work with high standards of integrity. Any member of the University with concerns that a breach has taken place under the CFA can report this to the Registrar under the Public Interest Disclosure (Whistleblowing) Code of Practice.
 

Tax evasion as a criminal offence sounds like something that most people will not come into contact with. However, it comes up in a number of situations that academic and administrative staff in departments will face regularly.

From research projects to departmental consultancies; overseas working to expense claims; collaborations to donations, there are many ways academic and administrative staff may inadvertantly find themselves in situations where there is a risk of tax evasion occurring.

Do you or your department:

  • Engage contractors, e.g. on research projects?
  • Contract work to consultants/contractors who run their own companies?
  • Claim medical VAT relief on projects?
  • Collaborate with third parties on research projects?
  • Have staff working overseas?
  • Process expense claims?
  • Accept donations?

We have put together a selection of case studies of situations where the CFA (2017) could impact the University and its staff.

 

CASE STUDIES

The Finance Division has developed a short training video providing an overview of the Criminal Finances Act.

 

criminal finances act training

https://www.youtube.com/embed/T_JiFKlxutw?wmode=opaque&controls=&rel=0" name="criminal finances act training" frameborder="0" allowfullscreen="" id="criminal finances act training

 

The British Universities Finance Directors Group (BUFDG) also offers a short CFA overview course which is recommended. The University is a member of BUFDG and has access to their online training, BUFDG Pro. Staff can register to use it free of charge by visiting the BUFDG site.

Other relevant courses:

  • VAT training - Details of all tax training courses being run in the year

 

The University is committed to carrying out its work with high standards of integrity. Any member of the University with concerns that a breach has taken place under the CFA can report this to the Registrar under the Public Interest Disclosure (Whistleblowing) Code of Practice

If you have any concerns about the application of the CFA, please contact the Tax Team  or Financial Assurance 

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Contact us


 : Finance Division
      University of Oxford
      23-38 Hythe Bridge Street

      Oxford, OX1 2ET

 : financial.assurance@admin.ox.ac.uk

 : 01865 (6) 16206

 Financial Assurance Team 

 
 
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