25th August 2017
Last week, we spoke about the increase in dawn raids related to tax evasion. This move highlights HMRC’s growing focus on clamping down on tax fraud and Pinsent Masons has suggested that the number of sanctions may increase even further following the introduction of new legislation next month. But what impact will the Criminal Finances Act have on recruitment agencies?
If dawn raids have become more common over the past five years, then it’s likely that activity will skyrocket once the Criminal Finances Act comes into power. The legislation introduces criminal offences to businesses that are found to be facilitating tax evasion and firms must now ensure that they have reasonable prevention procedures in place to stop this from happening.
Dawn raids rising
HMRC has used dawn raids as an effective ways of seizing personal documents, emails and electronic files from individuals for evidence to secure prosecutions for tax evasion. However, the tax authority must still get permission from magistrates to enter business or residential premises to search for any signs of illegal or non-compliant activity.
But what is the impact of the Criminal Finances Act on the recruitment industry specifically?
Essentially, firms are exposed to a much greater degree of risk than ever before. By being criminally liable for any incidents of the facilitation of tax evasion, agencies are facing more severe punishments than ever before. Even something as seemingly innocent as paying a window cleaner in cash, for example, could result in an unlimited fine or potentially even a prison sentence for the directors of the firm. If that doesn’t sound too appealing then it might be time to consider just how compliant your operation actually is, particularly with the most recent legislation.
And this also brings a new dimension into the fray, namely the reputational damage that a dawn raid or even being associated with tax evasion can have on your business. More and more organisations are becoming increasingly aware of the new, tighter market and are unlikely to want to partner with a firm that they know has been suspected of wrongdoing. With such severe punishments on offer, it’s simply not worth the risk.
This is the potential domino effect of the introduction of the Criminal Finances Act, and unless you want to see all of your hard-worked business and partnerships crumble away at a rapid rate, then it’s important to ensure you’re compliant before the legislation comes into place in September. That doesn’t leave you long.
If you’re looking for guidance and want to guarantee that you can avoid a prison sentence then partner with a specialist to lead you through the challenging new world for recruitment agencies.