What is the Criminal Finances Act 2017?

The Criminal Finances Act 2017 came into effect on 30th September 2017. The legislation was introduced by HMRC to stop facilitators of tax evasion by making it easier to target and prosecute companies and individuals found to be doing so.

The legislation states that an offence is committed where a corporate entity or partnership fails to prevent an associated person from criminally facilitating the evasion of tax, whether the tax evaded is owed in the UK or a foreign country with a connection to the UK.

Even if only one consultant is making dodgy referrals the whole company will be found guilty of non-compliance. Therefore, recruitment agencies must have procedures in place to ensure all staff members adhere to the law and are aware of the consequences of non-compliance.

If any consultants are accepting referrals from compliant umbrella companies, they must also declare these on a Personal Tax Return as the tax may not have been paid on the referrals.

When is the Criminal Finances Act breached?

The Criminal Finances Act is breached if someone at your recruitment agency has pointed the candidate in the direction of a non-compliant payroll provider for the purposes of tax evasion. You may also be found guilty if your candidates are not paying the correct amount of National Insurance Contributions or tax if this was carried out as a result of a recommendation by your agency.

What happens if the Criminal Finances Act is breached?

Non-compliance could result in unlimited fines for your recruitment agency and a custodial sentence for those responsible for the breach.

How can recruitment agencies implement reasonable prevention procedures?

  • Conduct thorough due diligence checks and ensure your supply chain is compliant
  • Have internal procedures in place to actively ensure compliance is maintained
  • Ensure all referral fees (if applicable) are agreed and signed for by the Directors and that the consultants are aware of the implications of accepting dodgy referrals

Want to know more about the Criminal Finances Act and other legislation affecting your recruitment agency? Contact the Agency team today. 

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