Business Facility Faces prosecution under UK's corporate tax evasion prevention laws
A UK accountancy firm has found itself in the spotlight, becoming the first business to be charged under the Criminal Finances Act (CFA) 2017 offences for failing to prevent the facilitation of tax evasion. The charges, related to an alleged tax fraud in connection with research and development (R&D) tax relief and Covid-19 "bounce back" loans, have raised concerns for businesses across the nation.
Under the CFA, businesses are expected to review their procedures over time to ensure they remain up to date and effective. A lack of these measures could lead to unlimited fines, reputational damage, and potential loss of regulatory approvals. In addition, under the Procurement Act 2023, a CFA prosecution can mean entire supply chains being barred from public bids.
The offences under the CFA are strict liability offences, meaning it is not necessary to prove knowledge on the part of senior management. This means that even if senior members of the firm were unaware of the tax fraud, the firm can still be prosecuted.
The prosecution of the UK accountancy firm comes after eight arrests in relation to over 100 allegedly fraudulent R&D tax credits totalling over £16 million. Prior to August 2025, there had not been any prosecution decisions under the CFA offences, but this has now changed.
In light of this development, businesses must take proactive, documented, and proportionate steps to prevent such facilitation. Key updated steps include:
- Implementing reasonable prevention procedures tailored to the business’s operations.
- Embedding technology-driven controls within operations.
- Ongoing monitoring and due diligence on transactions and business relationships.
- Aligning anti-tax evasion procedures with wider anti-corruption and economic crime frameworks.
- Training employees and associated persons.
- Ensuring senior management commitment and oversight.
- Seeking legally privileged advice promptly if any potential breaches or suspicious activities are identified.
The recent prosecution highlights that passive or generic anti-tax evasion policies are no longer sufficient. Businesses must demonstrate active, proportionate, and documented efforts to prevent facilitation of tax evasion within their supply chains, employees, and agents.
This is crucial because the CFA offences apply even if senior management did not intend or know about the facilitation. The prosecution risk now is real and imminent following the landmark case involving an alleged £16 million R&D tax credit fraud. Consequently, companies should urgently review and strengthen their compliance frameworks to meet HMRC’s expectations and mitigate enforcement risk.
The new failure to prevent fraud offence, covering various types of fraud including tax fraud, is set to come into force in September 2025. It is essential for businesses to stay vigilant and proactive in their compliance efforts to avoid finding themselves in a similar situation.
- Businesses, in response to the CFA prosecution of a UK accountancy firm, should take proactive steps to prevent tax evasion, such as implementing tailored procedures, embedding technology controls, conducting ongoing monitoring, aligning anti-tax evasion procedures with anti-corruption efforts, training employees, ensuring senior management oversight, and seeking legal advice promptly for any potential breaches.
- With the upcoming failure to prevent fraud offence in September 2025, which covers tax fraud among other types, companies must remain vigilant and proactive in their compliance efforts to avoid finding themselves in a similar situation that led to the CFA prosecution of the UK accountancy firm, associated with alleged R&D tax credit fraud totaling over £16 million.
