75% of businesses are unaware of the Criminal Finances Act: recruiters must act now

businesses are unaware of the Criminal Finances Act

25th March 2019

Here at 6CATS, something that we strongly advocate is the need for agencies to stay informed about the increasingly strict tax legislation being introduced around the world. One piece of legislation we’ve long discussed on our blogs is the Criminal Finances Act 2017. While this law could have profound consequences for those that contravene it, many business owners have still not taken action. In fact, a recent HMRC survey has shown that a staggering 75% of businesses are unaware of the Criminal Finances Act, and only 8% have carried out training on this law. This lack of awareness is shocking, and could potentially have huge ramifications for these companies. The fact is, recruiters need to be aware of this legislation, and take as much caution over compliance as possible when placing contractors abroad. So, what’s the latest?

Businesses are unaware of the Criminal Finances Act

The survey, commissioned by HMRC and carried out by IPSOS Mori, titled ‘Evaluation of corporate behaviour change in response to the corporate criminal offences’, quizzed senior individuals in 1,000 UK companies and partnerships about the Criminal Finances Act. Results were damning, with the vast majority of businesses unaware of what the CFA encompasses. In fact, only 25% of respondents had ever heard of the legislation.  The highest level of awareness sat, understandably, with financial and insurance firms, at 58%, compared to all other sectors, where this figure drops to 24%. For businesses that were aware of the changes, they generally demonstrated a good knowledge of the detail of the offences within the act.  For instance, 76% knew that it meant businesses could be found liable if they or anyone providing a service on their behalf failed to prevent the facilitation of tax evasion. They were also aware that potential punishments included unlimited fines, loss of regulatory approval or director dis-qualification.

Something that HMRC has heavily stressed regarding the CFA is the need for companies to assess the risk of being exposed to the facilitation of tax evasion by those providing services on their behalf, such as contractors, but despite this, only 24% of respondents had actioned this. Again, this was also more common among multinational companies (47%), compared to 22% of those based solely in the UK. Those firms in the finance and insurance sectors, were again top of the list for taking action, with half reporting these assessments had happened. The results also paint a concerning picture of the future, with only 23% of all businesses stating they had procedures in place to monitor and review policies preventing the facilitation of tax evasion.

Worryingly, HMRC has said that it eventually wants to reach a position where staff in senior positions actively promote a culture throughout the business that makes it clear that facilitating tax evasion would not be not acceptable. However, despite this, only a small number – just 8% – of businesses had organised internal or external training, in the last 12 months.

Agencies need to be aware

Clearly, this widespread ignorance of the Criminal Finances Act could potentially lead to negative consequences for agencies looking to place contractors abroad. The fact is this survey shows that, on the whole, businesses are woefully unequipped to deal with the increasing strictness of tax legislation worldwide. Ignorance of the law, or indeed of the behaviour of an associated person who could undertake tax evasion, will not be considered a defence, and businesses unaware of the Criminal Finances Act must act immediately. While this report has focussed on all types of business, from our experience, too many hiring firms are following similar patterns, leaving themselves dangerously exposed to potential criminal charges. Unfortunately, there is still a huge lack of education around what breaking the law could mean for agency owners in particular. As authorities worldwide introduce new legislation and penalties, the tax and compliance landscape is becoming increasingly complex. At the same time, international opportunities for agencies to make overseas placements are plentiful, and recruiters shouldn’t miss out on this due to the administrative headache of compliance. This is why we recommend using an expert contractor compliance service that can provide you with fully compliant, transparent and streamlined tax solutions.

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