Tax-dodging companies could be hit with limitless fines

New rules to prevent management from turning a "blind eye"

Zlata Rodionova@zlata07
Monday 18 April 2016 12:27
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HMRC said the current rules encouraged UK bosses to “turn a blind eye to the criminal acts of its representatives”
HMRC said the current rules encouraged UK bosses to “turn a blind eye to the criminal acts of its representatives”

Businesses whose staff help tax evaders could be hit by limitless fines under a proposed new UK rule.

Employers are now liable for the actions of their employees unless they can prove they took steps to stop illegal practices, according to a new consultation document released by the UK HM Revenue and Customs (HRMC) on Sunday.

Under the present rules prosecutors must prove that the majority of senior members of the company or board directors knew that the firm was helping a client evade tax.

But HMRC said this encouraged UK bosses to “turn a blind eye to the criminal acts of its representatives” to preserve the company’s credibility and reputation.

“In large multinational organisations decision making is often decentralised and may be taken at a level lower than that of the Board of Directors, with the effect that the corporation can be shielded from criminal liability. This also makes it harder to hold such organisations to account compared to a smaller organisation where decision making is centralised, ” the HMRC consultation said.

The new rules will encourages senior members to pay closer attention to what their employees are doing and remove their "excuse of ignorance” to tax evasion. This will make it harder for bosses to put the blame on someone else in case of a scandal.

Similar measures are being introduced in the banking industry with the aim to build a stronger and safer system. The bosses of UK banks will now have to prove they have acted responsibly or face an unlimited fine if their bank was to fail.

The publication of the “Panama Papers", leaked two weeks ago, have forced the government to accelerate plans to introduce new regulations to prevent corporate tax evasions. David Cameron was forced to publish his private tax records last week after his father was named in the leaked documents in relation to an investment fund he set up in Panama.

The Government plans to raise £12 billion by 2020 by cracking down of a handful of major tax avoidance tactics, the Chancellor said in his Budget in March.

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