Criminal Finances Act

Tax evasion, and the deliberate and dishonest facilitation of the commission of tax evasion by another person, are criminal offences. In September 2017, the Criminal Finances Act 2017 (CFA) came into force, creating two new criminal offences for companies and other bodies corporate, which includes the University:

the failure to prevent the facilitation of UK tax evasion offences by an associated person; and
the failure to prevent the facilitation of foreign tax evasion offences by an associated person.

An “associated person” includes:

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. Overseas workers and overseas activities are an area of particular risk.

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

CFA OFFENCES

Both the UK and foreign tax evasion facilitation corporate offences require three main stages:

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

STEPS BEING TAKEN BY THE UNIVERSITY

The CFA places strict liability on the University for any failure to prevent a breach of the act, with the penalty of an unlimited fine. The University therefore needs to put in place reasonable procedures designed to prevent the facilitation of tax evasion. The Government has suggested that polices and processes are put in place in line with six key principles:

Risk assessment
Proportionality of risk-based prevention procedures
Top-level commitment
Due diligence
Communication (including training)
Monitoring and review

The Assurance Management Group takes oversight responsibility for the University’s policies and processes to prevent facilitation of tax evasion. Internal Audit has supported the University in identifying risk areas, and activity is underway to confirm adequate processes are in place to manage these.

The University is continuing to develop its response, and activities undertaken under these principles will be updated.

AVAILABLE RESOURCES

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

Employment taxes (including 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 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.
Work is underway to support departments with colleagues working overseas or funding overseas fieldwork through the global mobility manager and our international advisers.
The Gifts and hospitality policy is in place to ensure gifts are identified and any tax implications dealt with.

Reminders of relevant areas are included in the annual Departmental Self-Assurance Return, and the Finance Division has developed the training below to inform staff of the requirements of the Act and their duties:

Criminal Finances Act training video