Tax Evasion Offences: Could you be liable?

The Criminal Finances Act of 2017 sets out rules to try and prevent corporations from ‘facilitating tax evasion’, which could put you, your employees, and your agency at risk of committing a criminal offence.

How does this affect recruitment agencies?

If a recruitment consultant intentionally refers someone to a non-compliant employment umbrella, payroll service or accountancy solution, where the taxpayer doesn’t pay the correct amount of tax to HMRC, the agency, as a company, could be guilty of assisting (or failing to prevent) the evading of tax. This is what the rules refer to as ‘facilitating tax evasion.’

An example of a non-compliant provider includes those that offer schemes which advise individuals to hide taxable assets, or keep money in off-shore accounts in order to avoid paying tax and NICs.

What’s the risk?

If found guilty, the agency could face unlimited penalties, as well as potential reputational damage, all as a result of working with the wrong people. It’s important to note that, under current law, it is not a defence to simply say that the agency was unaware of the consultant’s actions.

What do I need to do to reduce the risk?

To reduce risk, recruitment agencies need to ensure that those they work with are reputable and acting within the law. You must show that you have ‘reasonable procedures’ in place to prevent an offence from occurring.

Trafalgar’s recommendations:

  • Put together a Preferred Supplier List, regardless of your agency’s size.
  • Using a large pool of suppliers could put you at risk, so it’s important to check that each provider you work with meets certain criteria to keep you compliant, and within the law.
  • Do your due diligence on everyone you or your consultants refer to.
  • Review the working practices that are in place for third parties. If your consultants (or anyone else) are personally receiving incentives for referrals, it is essential that the income is disclosed by means of a personal tax return, in order to avoid charges of tax evasion for the consultant or agency.

Make sure your agency is protected today. For help with your Preferred Supplier List, or for professional advice, get in touch with Trafalgar now on 020 7940 1990.

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