Businesses still at risk under Criminal Finances Act

contractor compliance issues

12th October 2018

Regular readers of our blog will have seen the many calls we’ve made to recruitment agency owners to get their firms’ compliance in order in light of the Criminal Finances Act 2017 (CFA). Far too few recruitment companies have done sufficient work on developing a ‘reasonable procedures’ defence.

This might be complacency or calculated risk taking but what is clear is that ignorance of the issue is never going to work as a defence.

Failing to manage the risks

And it is not just recruiters, according to a recent report by Pinsent Masons, a staggering 55% of FTSE 100 companies don’t outline how they are managing the risks of tax evasion in their published documents – a concerning fact in light of the CFA. Indeed, as the article highlighted:

Employment tax compliance is also a significant risk area for the UK’s new corporate criminal offences of failing to prevent the facilitation of tax evasion. For example, an employee who deliberately turns a blind eye to a contractor misrepresenting their position could be facilitating tax evasion, exposing their employer to criminal liability.”

Time for change

The simple fact is, recruiters cannot continue to ignore this issue or remain under the misconception that they’re not at risk. It is a very real problem as the major law firm Osborne Clarke highlighted, “An offence will be committed where a corporate (recruitment firm) fails to prevent an “associated” person criminally facilitating the evasion of tax, whether the tax is evaded in the UK or in a foreign country.”

As authorities worldwide continue to battle tax fraud and Acts such as the CFA are initiated, agencies placing contractors overseas will find themselves exposed to greater scrutiny and business-critical threats.

It is crucial that owners of these companies act now to ensure that they have ‘reasonable procedures’ in place to cover themselves and their business. As we’ve said before, claiming ignorance of the actions of one of your contractors or recruiters is not deemed a defence. And while there’s yet to be a headline-making case brought under the Criminal Finances Act, no one wants to be the first person made an example of.

In order to ensure you and your firm remain compliant no matter where in the world you operate, it is always advisable to speak to an expert – contact us today.

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