Legislation, legislation, legislation – Criminal Finances Act 2017

Much has been written about the Off-payroll legislation reforms over the past 18 months. It is the most significant legislative change to affect the UK labour supply chain in recent times, after all.

Unfortunately, it’s not the only legislation that end clients and recruitment suppliers need to consider when it comes to compliance and risk.

Tax avoidance has been a focal point for the treasury for several years. Successive governments have slowly but surely tailored legislation to help their fight against tax evasion.

In doing so, HMRC has been at the forefront of this fight, with a keen eye on the UK’s temporary labour market.

The changes to the IR35 legislation are a prime example. However, other pieces of legislation present an equal, if not a higher, risk to those involved in the supply and engagement of freelancers and temporary labour in the UK.

The Criminal Finances Act (2017)

The criminal finances act (2017) gives law enforcement agencies and partners capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism.

The governments’ guide to tackling tax evasion states in its aim for the legislation that “relevant bodies should be criminally liable where they fail to prevent those who act for, or on their behalf from criminally facilitating tax evasion.” Those who act for or on behalf are defined as an “associated person”.

Previously, legislation had stipulated that senior members of an organisation had to be proven to be aware of or involved in the illegal activities. However, it was felt that this was almost an incentive for senior members to turn a blind eye in order to claim ignorance and protect the organisation.

The current criminal finances act removes the need to prove awareness and puts the onus firmly upon business owners and leaders to do their due diligence. 

Having already identified a high number of tax evasion schemes within the umbrella sector, it’s clear that HMRC already has a focus on the sector. It also now has the legislation in place to support enforcement.

The criminal finances act (2017) demands due diligence

The consensus within the UK temporary labour market is that an “associated person” within the supply chain would include recruitment agencies and umbrella companies in a case of law.

For Directors and business owners, whether they be engagers or suppliers of temporary labour, the risk of association or complicity to tax evasion has become far higher due to the criminal finances act (2017). With unlimited financial penalties resulting from a conviction, the price is likely to be high.

In the wake of the IR35 reforms, analysis and insight have suggested a corralling of contractors to umbrella models.

Our response is how many Directors and Board members are confident enough of their due diligence to identify and prevent tax evasion within their supply chain?

For a free, no-obligation audit and assessment of your IR35 compliance process, you can speak directly with Andy Webster, Founder and Director, Workr Compliance, on 07827 810851 or at aw@workrgroup.com.