Corporate Criminal Offences Legislation

Learn about the Corporate Criminal Offences (CCO) Legislation and the risk to your business

What is the Corporate Criminal Offences Legislation?

The Corporate Criminal Offence Legislation was introduced in September 2017 and is a broad-reaching legislation which makes it a criminal offence for businesses to facilitate, or fail to prevent the facilitation, of tax evasion.

Where a person acting on behalf of a business, including employees, agencies and service providers, facilitates the tax evasion of a third party, the business will be subject to criminal liability unless it can demonstrate that it put in place procedures to prevent such facilitation.

Prosecution and conviction could result in an unlimited financial penalty, with the additional reputational damage and adverse publicity that breaching the CCO legislation could inflict.

Thoughtful contractor

Who does the CCO Legislation apply to?

The Corporate Criminal Offences Legislation applies to all taxes and businesses – there is no de minimis.

Any tax evasion in the supply chain could put the parties at risk – recruitment agencies should be particularly vigilant with practices such as commission payments from service providers, and maintaining robust PSLs.

Corporate criminal offences and IR35

Prior to IR35 reform originally due to be implemented in 2020, some opinions suggested that should a contractor fail to operate IR35 when the relationship is such that IR35 ought to have been applied, it could be deemed evasion in accordance with the CCO legislation.

The use of off payroll workers is known to be an area of focus for HMRC under the CCO legislation and therefore, post IR35 reform, if HMRC were to conclude the business was turning a blind eye to failings under the new regulations, failure to consider the new IR35 rules could bring a business within the scope of the CCO.

Taking the above into consideration, theoretically there could also now be a risk under the Corporate Criminal Offence Legislation in respect of the IR35 reform delay until 2021.

IR35 reform was recently delayed until 2021 amidst the COVID-19 pandemic. Announced only a few weeks before the expected implementation, many organisations had already prepared for the reform by undertaking status determinations of their contractors, with some being determined as ‘inside IR35’.

With the delay however, contractors maintain their responsibility to assess and manage their own IR35 status until April 2021.

On this basis, there is a possibility that a business that continues to engage a contractor working outside IR35, after having determined them as inside IR35, could be deemed under the CCO legislation to be facilitating tax evasion.

The risk of this happening is relatively low, given that the responsibility is that of the contractor, and HMRC don’t tend to prosecute for tax evasion when it comes to IR35 compliance. However, it is important that organisations are fully aware before making decisions and, companies should document their position as part of their CCO risk assessment process.

Contractor smiling

How to minimise your CCO risk

As with most compliance legislation, risk assessment is a core component of protecting a business. The business should assess its risk exposure in relation to the CCO and document any decisions made, including use of service providers and suppliers.

Training should be provided within the organisation to ensure employees understand the legislation’s implications, as well as the communication of policies and procedures.

All decisions, policies, and procedures as well as changes should be monitored and reviewed on a regular basis with documentation maintained.

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