The government has announced plans to bring forward the introduction of a criminal offence for corporations which fail to stop staff facilitating tax evasion.
For the first time, company owners will be held criminally liable if they fail to stop employees from helping customers and business associates to evade tax.
In his Budget statement in March 2015, George Osborne said that the government would deliver on its pledge to bring in the measure during the current parliament. In a statement to the House of Commons on 11 April 2016, David Cameron went further by confirming the offence will be made law before the end of year.
The prime minister said: “This government has done more than any other to take action against corruption in all its forms, but we will go further. That is why we will legislate this year to hold companies who fail to stop their employees facilitating tax evasion criminally liable.”
The move can be seen as part of the government’s renewed efforts to clamp-down on corruption throughout society more broadly following the unprecedented leak of 11.5m files from the database of the world’s fourth-largest offshore law firm, Mossack Fonesca.
Referred to as the “Panama Papers”, the documents reveal an array of methods in which mega-rich individuals are able to exploit offshore tax domiciles. In all, 143 politicians from around the word including 12 national leaders have been implicated as part of the leak. Cameron has confirmed plans to create a cross-agency task force to investigate all evidence of British illegality that has emerged from the Panama Papers.
Commenting on the announcement, tax partner at law firm Whittingham Riddell, Duncan Montgomery, said: “UK SMEs have little or nothing to fear from new rules that penalise offshore issues, and in fact it may yet help to level the playing field for all.”
The statement comes one month ahead of the London Anti-Corruption Summit, which the prime minister will host, which aims to step up global action to expose, punish and remove corruption from society more broadly.
The first of its kind, the event will bring together leaders from global politics, business and society to agree a package of steps to bring about the end of a “culture of corruption”. Attendees are expected to tackle issues such as corporate secrecy, government transparency and the enforcement of international anti-corruption law.
Get up to speed with the new digital tax system with our expert’s guide.
Sign up to our newsletter to get the latest from Business Advice.