Here Richard Grint, financial services expert at PA Consulting Group warns firms to start acting now to implement a framework that will monitor and mitigate risks of the new tax evasion fines to be implemented by HMRC this month.
Firms need to start acting now to implement a framework that will monitor and mitigate risks. The new legislation introduces an entirely new offence whereby corporations can be held responsible if any employee or agent acting on their behalf facilitates tax evasion in any way – and it has a global scope. This represents a steep change from the range of previous tax evasion offences and is a significant additional burden for firms.
Recent surveys by industry bodies suggested that less than 40% of financial services (FS) institutions have considered (let alone acted upon) the regulations – which could have significant fines attached. There is also no ‘grace’ period – HMRC will be enforcing this from the 1st October and are traditionally less open to dialogue than ‘true’ regulators.
Firms are obliged to have a framework in place to monitor and mitigate the risks – the government guidelines recommend that firms broadly use their Financial Crime frameworks as a starting point, and there are considerable synergies.
The risk is notably bigger for insurers and those FS firms that have a lot of intermediated business (IFAs, brokers etc.), as they are more likely to have agents operating on their behalf in a position to help facilitate tax evasion by customers. Managing the risk created by these intermediaries will be a substantial change from what has happened before.
Tax evasion has been a low priority for companies, but this needs to change and fast. The nature of this sort of change (i.e. boring, complex, no benefit at all to customer-facing businesses) means that:
- a) it tends to get deprioritised to the bare minimum, and;
- b) the teams working on it tend not to be high performing and therefore aren’t able to influence those around them to get their work moved up the priority queue.
This needs to change. If companies do not reorganise their priorities and enforce these regulations, then they will be facing significant fines.