“What?” you may say, “we wouldn’t dream of doing anything that was criminal”. But the “Corporate Criminal Offence” (CCO) that we have in mind can be committed by doing nothing! It is one of those things that you can slip into without realising it. Doing nothing isn’t an option.
What is this Offence?
Since 2017, where a charitable incorporated organisation, charitable company or any other corporate body or partnership fails to prevent the facilitation of tax evasion, that body opens itself up to criminal charges, even when that tax evasion is undertaken by a third party.
What is criminal has not changed. But who is held accountable for the tax evasion has.
If my charity doesn’t evade tax, how can there be a problem?
In general, charities are well behaved! They seek to pursue public good rather than cheat on their taxes. But this is not the point. An offence under the 2017 law is committed where the charity fails to prevent the facilitation of tax evasion either by the charity or by anyone associated with it. It is the “associated with it” rule that is most likely to cause problems.
For these purposes, ‘tax’ includes both UK and overseas tax.
“Associated” is defined in law as:
- an employee of the charity acting in the capacity of an employee,
- an agent of the charity acting in the capacity of agent, or
- any other person who performs services for or on behalf of the charity who is acting in the capacity of a person performing such services.
Consider the situation where the church arranges for a plumber to come and repair the church boiler. The plumber gives a quote for the work but says that it would be £200 cheaper if the church pays cash. The treasurer readily agrees. Why did the plumber give a cheaper price? It is most likely because they will not declare the income from the repair job for income tax and VAT purposes – which is tax evasion. The church (through the treasurer) has facilitated that tax evasion and, as a result, may be guilty of a criminal offence.
Defence against a criminal charge
The law requires positive action on the part of all charities within the scope of the CCO. It is a statutory defence to show that the charity had reasonable procedures in place to prevent the facilitation of tax evasion, including by persons ‘associated’ with the charity, as above.
The Government has published statutory guidance containing the procedures that relevant bodies can put in place. The prevention procedures are informed by six guiding principles:
- Risk assessment
- Proportionality of risk-based prevention procedures
- Top level commitment
- Due diligence
- Communication (including training)
- Monitoring and review
In addition to the Government’s statutory guidance (which is comprehensive and should definitely be consulted), we have published two short Briefing Papers on our website:
Each of these gives a brief overview of the law, examples of possible offences (including using Gift Aid), and an example of the possible contents of a risk assessment and associated mitigation procedures.
Appears to apply to corporate entities but what about old style charitable trusts? Presumably individual trustees carry the responsibility
@Patrick: Yes, correct. Although tax evasion has always been a criminal offence, it has been difficult for HMRC to prosecute a company or the company's directors (or an incorporated charity's trustees) for assisting or facilitating tax evasion. It is for this reason that the new offence of facilitation was put on the statute book. In most cases of unincorporated bodies and trusts, it is easier for them to prosecute the individuals that may be culpable.