Companies whose employees help clients evade tax could face ‘limitless’ fines under a new rule that has been proposed in the UK.
Employers will be held liable for actions of employees, unless they can prove they took action to stop illegal tax dodging practices. This is according to a new consultation document by HMRC which was released over the weekend. Under current rules, prosecutors must prove that the majority of company directors or board members knew that the business was helping a client to avoid paying tax.
However, HMRC has said that the current rules encourages bosses to ‘turn a blind eye’ to criminal activities committed by its clients in order to preserve the credibility and reputation of the company. The consultation said that decision making is made away from the Board in order to attempt to protect the company from being held responsible for any criminal liability. This makes it harder for HMRC to hold accountability to larger companies in comparison to smaller ones.
The new rules will make senior members of a company pay attention to what their employees are doing, ensuring that there is no excuse for ignorance. This will eventually mean that in the wake of a tax evading scandal, there is no room for bosses to put the blame on someone else.
Currently, similar measures are being introduced in the banking industry. People in charge of UK banks will now have to prove that they acted in a responsible way or face an unlimited fine.
Tax avoidance has been all over the news recently. ‘The Panama Papers’ were leaked two weeks ago, which forced the Government to move ahead with their plans to introduce new regulations to stop companies avoiding corporation tax. A few weeks ago, the Prime Minister David Cameron was forced to publish his private tax return after his father was named in the leaked documents relating to an investment fund in Panama.
By 2020, the Government is aiming to raise £12 billion by cracking down on tactics to avoid paying tax. This plan was announced by the Chancellor back in March when revealing his Budget.
For more information about Corporation Tax, call the Corporation Tax helpline.