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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Approved by Council on 13 July 2020.

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The University is committed to compliance with financial and tax legislation and to minimising the risk of tax fraud. It is committed to ensuring that its activities are conducted honestly, in accordance with relevant legislation and to the highest standards of integrity.

The University will take appropriate action to prevent the facilitation of tax evasion in respect of its activities under UK law or the law of any other country. Facilitation of tax evasion by University employees or students acting on behalf of the University will be treated as a serious disciplinary offence. Where tax evasion or facilitation of tax evasion is shown to have occurred, the University will take action, which may include dismissal and legal action. The University may terminate its relationship with other individuals and organisations working on its behalf if they breach this policy.

The purpose of this policy is to set out the responsibilities of the University and those working for it in observing and upholding its position on preventing the criminal facilitation of tax evasion. The University will review its processes and procedures regularly in respect of tax legislation including the Criminal Finances Act 2017.

Staff and associated persons who act on behalf of or provide services to the University are expected to act and conduct the activities of the University at all times to the highest standards of integrity and in line with the relevant legislation. This means:

  • no member of staff or person acting on behalf of or providing services for the University should seek to evade tax or take steps to facilitate the evasion of tax; 
  • staff and persons acting on behalf of or providing services for the University must make every reasonable effort to abide by relevant University policies and processes; 
  • any suspicion of tax evasion or the facilitation of tax evasion should be reported immediately through the channels defined by this Policy, and the University will consider all such reported instances. 

3.1 Scope 

This Policy applies to all staff and anyone working on behalf of the University, including staff, students, directors, officers, agency workers, seconded workers, volunteers, interns, agents, contractors, external consultants, third-party representatives and business partners, sponsors or any other person associated with the University wherever located. 

The policy shall be published publicly via the University website. 

This Policy has been adopted by Council and applies throughout the University, apart from Oxford University Press which has its own complementary Policy and procedures. This Policy also applies in full to majority and wholly owned University subsidiary companies unless separate policies have been formally approved and adopted by the Boards of those companies and endorsed by Council’s General Purposes Committee. 

3.2 Definitions

Tax evasion - a deliberate effort not to pay tax, and the deliberate and dishonest facilitation of the commission of tax evasion by another person. These are established criminal offences. 

Corporate criminal offence - in September 2017, the Criminal Finances Act 2017 (CFA) came into force, creating two new criminal offences for companies and other bodies corporate (including the University) of failing to prevent the facilitation of tax evasion in the (1) the UK or (2) overseas by an associated person. Failure to prevent our employees, workers, agents or service providers facilitating tax evasion could lead to criminal sanctions including an unlimited fine as well as exclusion from tendering for public contracts and reputational damage. 

Tax evasion in the UK - deliberately cheating HMRC out of tax due. 

Foreign tax evasion offences - 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 of tax evasion - another person knowingly assists in the evasion of tax.

3.3 Examples

Examples of tax evasion include, but are not limited to:

  • Deliberately mis-describing self-employment status (i.e. requesting to be treated as a consultant rather than an employee) to evade employment taxes.
  • Defining another organisation as a collaborator rather than a supplier in order to evade VAT.
  • Dishonestly stating that goods qualify for medical VAT relief when they will not be used on relevant activities.
  • Evading tax on benefits by deliberately failing to make appropriate declarations on an expenses claim form.
  • Falsifying an invoice amount to avoid VAT.
  • Deliberately or dishonestly failing to establish appropriate arrangements for overseas workers to meet local tax and social security requirements. 

3.4 Responsibilities

Every member of staff and associated person who acts on behalf of the University is responsible for ensuring that they read, understand and comply at all times with this Policy and all relevant policies and processes, and guard against tax evasion. 

The Registrar is responsible for ensuring that this Policy is implemented and maintained, that appropriate explanatory guidance is provided and that any suspected instances of tax evasion and/or facilitation of tax evasion are investigated appropriately. 

Heads of Division, Heads of Department (including Faculty Board Chairs), and Heads of University Services (UAS and GLAM) are responsible for ensuring that staff within their divisions, departments or sections (as appropriate), affected students, and other associated persons are made aware of this Policy and associated explanatory guidance. 

The Boards of Directors of majority and wholly owned subsidiary companies of the University are responsible for ensuring that this Policy, or an alternate Policy that is approved by Council’s General Purposes Committee, is implemented and maintained within those companies, and that staff and other associated persons are made aware of the Policy and associated explanatory guidance. 

3.5 Third parties

The University can be prosecuted for failing to prevent the facilitation of tax evasion by an associated person. These include: 

  • an employee, acting in the course of their work; or
  • an agent, acting in their capacity as an agent; or
  • any person who performs services for or on behalf of a relevant body in their capacity of performing a service.

This definition includes contractors, consultants and Joint Venture partners. 

The University expects any third party acting for or providing services to the University to demonstrate commitment to the Criminal Finances Act, and to take appropriate measures and action should it discover any tax evasion. Where appropriate, the University will include contractual obligations in respect of adherence to this Policy in its agreements with third parties. 

Tax evasion risk should be regularly assessed as a specific part of the wider risk assessment and management performed by divisions, departments and committees. Significant transactions – those that are of high value, or high risk, or high profile – should be subject to a specific risk assessment. High risk transactions are those where there is a significantly increased risk of tax evasion due to the nature of the transaction, the third party, territory, opportunity or sector. Proportionate preventative and detective controls should be identified and implemented, together with regular reviews to determine their efficacy. 

This Policy interacts and overlaps with a number of other University policies and procedures: 

This Policy also takes account of the University’s wider legislative obligations, specifically HMRC tax legislation and the Criminal Finances Act 2017. 

Individuals who reasonably suspect the occurrence of tax evasion or the facilitation of tax evasion in the context of the University’s activities should report their concerns as soon as possible to the Director of Finance, the Registrar or to compliance@admin.ox.ac.uk, providing a brief description of the alleged irregularity, and any evidence that supports the allegations or irregularity and identifies the individual or individuals responsible. 

Any report will be treated as a disclosure under the University’s Public Interest Disclosure (whistle-blowing) Code of Practice and it will, therefore, be brought to the attention of the Registrar who will decide on the procedure to be adopted and determine whether there is a case to answer. Subjecting people who have reported reasonably-held concerns or suspicions to any detriment will be regarded as a disciplinary issue, as will abuse of process by making malicious allegations.

If you are unsure about whether a particular act constitutes tax evasion or foreign tax evasion, you can discuss it with your manager. You should note that the corporate offence is only committed where deliberate and dishonest action is taken to facilitate tax evasion. However, a deliberate failure to report suspected tax evasion or ignoring suspicious activity could amount to criminal facilitation of 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.

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

 

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