Supply chain Tax compliance is a hot issue for HMRC so much so that they are now visiting large businesses (the top 2,000 in the UK) to check, as part of standard HMRC risk reviews, what prevention measures and procedures they have in place to police their supply chains.

HMRC are looking at new ways to use the powers granted to them in the Criminal Finance Act 2017 (CFA 2017) to usher in a new era of supply chain tax compliance.

Businesses have a particular exposure where companies they rely on to pay and employ workers, including umbrella companies or overseas payroll partners such as the employer of record companies are involved in tax evasion.

The end-users and staffing companies who use them may face prosecution, unlimited fines, and reputational damage unless they have in place reasonable steps to prevent the facilitation of tax evasion. (Corporate offences for failing to prevent the criminal facilitation of tax evasion.)

What do reasonable measures look like and what does HMRC expect?

These are based on 6 guiding principles recommended by HMRC

  • risk assessment.
  • proportionality of procedures.
  • top-level commitment.
  • due diligence.
  • communication and training.
  • monitoring and review.

As the Corporate Criminal Offence is a reverse burden of proof offence it is incumbent on the defendant/business in question to prove innocence rather than the prosecutor (HMRC) to prove guilt. Therefore, it is vital that reasonable measures and procedures are in place to protect from prosecution.

Umbrella Check is a compliance business that through training and monitoring can help companies develop a culture in line with HMRC’s expectations.