The paper tiger finally roars: HMRC takes action on the facilitation of tax evasion

New failure to prevent facilitation of tax evasion offences were introduced into UK law in September 2017 and cover both domestic and overseas tax evasion. The offences were brought into law to make it easier for UK prosecutors to go after corporates (such as banks, accountants, lawyers or consultants) who ultimately fail to prevent others (such as their clients) from committing tax evasion offences either in the UK or overseas. Almost eight years after they first came into force, there is yet to be a successful prosecution. Finally, however, an accountancy firm has been charged under these provisions.

Criminal liability

Historically, finding a company or other corporate entity liable for a criminal offence has been a challenge for some time due to the narrowness of the so-called 'identification principle' under English law. This requires the commission of an offence to be attributed to a natural person who can be said to represent the corporate's "directing mind and will" at the time the offence was committed.

The introduction of the 'failure to prevent' structure by way of section 7 of the Bribery Act 2010, which came into force on 1 July 2011, is generally regarded as a game changing moment. The intention was to make it easier to prosecute corporates in the UK for specific conduct, requiring only that a person associated with the corporate carried out the conduct – in this case, bribing another person in order to gain an advantage for the corporate. A statutory defence of adequate procedures is available. Unfortunately, although there have been some prosecutions under section 7, there has only been one contested trial meaning the defence has yet to be properly tested in court.

The same failure to prevent model was followed in the Criminal Finances Act 2017 (CFA) which created two offences relating to the facilitation of tax evasion: failure to prevent the facilitation of UK tax evasion contrary to section 45, or foreign tax evasion contrary to section 46. Corporates found guilty can face an unlimited fine. HM Revenue & Customs (HMRC) is responsible for investigating suspected domestic offences; prosecutions will then be brought by the relevant local public prosecutor (the Crown Prosecution Service in England and Wales). The Serious Fraud Office (SFO) of National Crime Agency will investigate cases of foreign tax evasion.

However, although these offences came into force on 30 September 2017 (after official guidance was published), there has been a conspicuous lack of prosecutions.

In the meantime, the approach to corporate criminal liability has been partly reformed by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) whereby, as of 26 December 2023, a corporate can be held liable for an economic crime where a senior manager acting within the actual or apparent scope of their authority commits a relevant offence.¹ This reformed doctrine has yet to be tested in court.

Another new and high-profile 'failure to prevent' corporate criminal offence has also appeared on the statute books and will be in force from 1 September 2025: failure to prevent fraud under section 199 of ECCTA.

Failure to prevent the facilitation of tax evasion had not been tested in court for almost eight years until it was reported on 5 August 2025 that an HMRC investigation has led to the prosecution of Bennett Verby Ltd, a firm of accountants, under section 45 of the CFA. Following a brief administrative hearing at Manchester Crown Court on 7 August, a provisional trial date was set for 27 September 2027.

It is interesting to note that this first prosecution relates to an accounting firm. HMRC's guidance on the offences lists entities in the financial services, legal, tax advisory and accounting sectors as being most affected by the new offences due to operating in higher risk sectors.²

Alongside the accounting firm, six individuals appeared in court and were charged with criminal offences including cheating the public revenue (a common law tax evasion offence) and money laundering. The corporate charge appears to relate to alleged fraud involving Research and Development Tax Credits and Bounce Back Loans with a total value of around £16 million.

No formal pleas have been entered by any of the parties charged and so it remains to be seen if the firm will contest the prosecution so that the case proceeds to a jury trial in 2027. If it does, the jury will have to decide if the firm has raised a valid defence on the basis either of having reasonable prevention procedures in place at the relevant time or that it was reasonable for this firm not to have such procedures in place. These are questions of fact to be decided on the strength of evidence placed before the jury.

Previously, statistics have shown that HMRC has conducted a number of investigations in connection with this offence without progressing any of them to the point of bringing a criminal charge. In January 2025, HMRC published figures which showed it had 11 live investigations underway, with a further 28 "live opportunities" under review. HMRC also stated it had "reviewed and rejected an additional 114 opportunities".³

The offence is clearly a complicated one to investigate. A successful prosecution of a corporate under section 45 of the CFA requires three tests to be met:

• There has been criminal tax evasion by a corporate or individual taxpayer under existing UK law (although no conviction is required);
• The tax evasion was facilitated, to a criminal standard (deliberately and dishonestly), by an "associated person" of the corporate; and
• The corporate failed to prevent the associated person from committing the act of criminal facilitation.

The underlying tax evasion can relate to any kind of UK tax, for example evasion of customs duty, National Insurance, income tax or VAT.

Investigating and prosecuting a corporate for the foreign tax evasion offence under section 46 may be more complex. It requires an appropriate UK nexus and dual criminality: to quote the HMRC guidance:

"the overseas jurisdiction must have an equivalent tax evasion offence at the taxpayer level and it must be the case that the actions carried out by the taxpayer would constitute a crime if they took place in the UK … secondly, the overseas jurisdiction must have an equivalent offence covering the associated person's criminal act of facilitation and it must be the case that the actions of the associated person would constitute a crime had they took place in the UK".

It is possible that the SFO may seek to make use of section 46 of the CFA in connection with cases of overseas bribery which it is investigating, and that there will be elements of money laundering at play also.

It is not surprising therefore that it is a section 45 case relating to relevant small domestic entity which has become the first to reach court.

A renewed focus

After an additional surge of interest when the new offences found at sections 45 and 46 of the CFA came into force in 2017, there is a risk that some firms could be treating compliance with this legislation as a lower priority due to the lack of enforcement. The prosecution of Bennett Verby Ltd is a reminder that the facilitation of tax evasion offences are very much active and that HMRC, true to its word, intends to progress suitable cases to the point of prosecution where it can.

What to do?

All firms should ensure that they have conducted a thorough assessment of the risks that facilitation of tax evasion could occur across their business, considering the specific activities of the organisation. From there, firms should consider what procedures should be put in place in proportion to those risks, including a policy that shows a commitment to preventing tax evasion from the highest levels of the organisation and is embedded, communicated and understood through the organisation. All risk assessments should be kept under review and refreshed on a regular basis, or when significant changes occur which could affect risk, and other policies and procedures should be subject to ongoing monitoring and review.

HMRC's guidance makes it clear that firms which already undertake risk assessments relating to their business activities (for example, a wider financial crime risk assessment) must ensure that tax evasion facilitation risk is included.

White & Case can provide support and assistance with the preparation, maintenance and development of assessments and procedures.

_{1 Section 196, Economic Crime and Corporate Transparency Act 2023
2 'Tackling tax evasion, Government guidance for the corporate offences of failure to prevent the criminal facilitation of tax evasion', 1 September 2017, available at https://www.gov.uk/government/publications/corporate-offences-for-failing-to-prevent-criminal-facilitation-of-tax-evasion
3 https://www.gov.uk/government/publications/number-of-live-corporate-criminal-offences-investigations/number-of-live-corporate-criminal-offences-investigations}

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