What is the Criminal Finances Act?

One part of the Act introduces a new ‘corporate criminal offence of failure to prevent the facilitation of tax evasion by another party’. There are two corporate offences, UK and Overseas.

The UK offence. There are three stages to the UK offence.

• Stage 1 – The criminal tax evasion by a taxpayer (either an individual or a legal entity) under existing law.
• Stage 2 – The criminal facilitation of the tax evasion by an ‘associated person’ of the University who is acting in that capacity.
• Stage 3 – The University or its subsidiaries failed to prevent its representative from committing the criminal facilitation act.

The Overseas offence. The three stages for the overseas offence are the same, albeit with the additional requirement for dual criminality, except that the tax evaded is non-UK tax:

• Stage 1 - The criminal evasion of non-UK tax by a taxpayer (either an individual or a legal entity).
• Stage 2 – The criminal facilitation of the tax evasion by an ‘associated person’ of the University who is acting in that capacity.

In addition to tax evasion and facilitation being criminal offences in the foreign jurisdiction (Stages 1 and 2), they must also be criminal offences under UK law if they were to be committed in the UK (the ‘dual criminality’ requirement) and part of the facilitation must have been performed in the UK.

• Stage 3 The University or its subsidiaries failed to prevent its representative from committing the criminal facilitation act.

What steps can we take to prevent tax evasion?

Risk Assessment

The University regularly reviews its risks and associated processes and procedures to ensure that all steps are taken to prevent facilitation of tax evasion.

The University maintains a register of possible risks of the facilitation of tax evasion by its staff and associates, as well as listing controls to mitigate those risks, and any actions required to improve those controls. This register is regularly reviewed and updated (at least annually) as and when required in relation to the nature of the specific risks.

The University reviews its policies and guidance in relation to the Criminal Finances Act on an annual basis alongside similar Business Conduct policies.

Standard clauses in contracts

The University includes a standard anti-tax evasion clause in relevant contracts to reflect its zero-tolerance approach to tax evasion in the conduct of its business. Where it is not possible to use the standard clause in relevant contracts, alternative wording providing the University with equivalent protection will be approved by the Compliance Board .

Training and Staff Awareness

In April 2017 Her Majesty's Revenue & Customs (HMRC) introduced significant changes relating to regulations around IR35 which applies to payments made to intermediaries. IR35 is a set of UK tax rules designed to prevent “disguised employment” — where someone works like an employee but operates through a limited company (often called a personal service company, PSC) to pay less tax.

To ensure IR35 compliance the University of Bath operates a Non-Employment Status Assessment (NESA) process. Before colleagues are given access to complete NESA assessments, a two-stage online training course must be completed.

It is also worth noting that the Criminal Finances Act 2017 is connected to Economic Crime and Corporate Transparency Act 2023 and the corporate criminal offence of ‘failure to prevent fraud’. The University of Bath’s has Counter Fraud Policy and a Fraud Risk Register that is maintained by Internal Audit.

What do I do if I suspect tax evasion is taking place?

The University’s procedure for reporting financial irregularities, including tax evasion, can be found in University’s Financial Regulations under the heading ‘Irregularities’.

Our Financial Regulations state that:

• Any person (staff and associate) who has reason to believe that an irregularity with financial implications for the University has or is about to take place, is required to inform their Head of Department and the Head of Internal Audit immediately.
• The Head of Department will in turn notify the Director of Finance immediately.
• If it is suspected that the Head of Department is involved in the irregularity, the matter should be notified to the Director of Finance or Internal Auditor directly. If it is suspected that the Vice-Chancellor or Director of Finance are involved in the irregularity the matter should instead be notified to the Treasurer.
• Failure to inform the appropriate person immediately may mean that further losses are incurred or that evidence is lost.

Staff and associates are reminded that they are required at all times to abide by the University's policies and procedures on Business Conduct.

Failure to comply with these policies and the obligations detailed may result in disciplinary action for staff and termination of contract for associated persons.

What if I am worried about reporting?

The University encourages everyone to speak up and report any concerns they may have about bribery activity. This is a key part of the University’s commitment to ethical and legal compliance. The University is committed to ensuring that individuals making reports in good faith do not suffer detriment as a result.

Members of staff may also raise concerns under the whistleblowing procedures as set out in the University's Public interest disclosure (whistleblowing) policy.

Examples of aiding and abetting criminal tax evasion.

For illustration purposes, examples are given below of when an Employee or Associate of the University might themselves be guilty of committing an offence of criminal tax evasion, and thus also the University itself:

1. Deliberately entering false or misleading information on the NESA (Employment Status Questionnaire):

A Supplier wishes to be treated as a self-employed contractor so that payments made to them by the University are gross, and they can evade paying appropriate income tax and national insurance liabilities. Knowing this, a University employee helps the Supplier to evade tax by providing false information on the NESA questionnaire used by the University to assess whether such a Supplier may be considered as self-employed for tax purposes. By supplying false information in this way, the University employee is committing a criminal offence as they have assisted a third party in criminal tax evasion.

2. Colluding with another University to artificially document services supplied to that University as outside the scope of VAT:

A University has asked a staff member from the University of Bath to supply data analysis services to them in respect of some grant funding they are receiving, where the grant funding is outside the scope of VAT. As such University X is unable to recover any VAT University might charge them for the data analysis service. University X asks the University of Bath to state falsely in the Agreement between them, that the 2 Universities are acting as Collaborators on the project, (when this is contrary to what is actually happening in practice). The University conclude that University X are asking this to evade paying VAT but go ahead and sign the document regardless without making any further enquiries or seeking help internally. The University research employees are committing a criminal offence as they have agreed to sign an Agreement, where they know the information provided is false and was done so that University X could evade paying the associated VAT liability on their services.

3. Helping another employee or third party claim a payment due to them as an expense rather than another type of payment which would be subject to tax:

A University Head of Department agrees to allow one of their members of staff to claim home to University (place of work) mileage through an expense form. However, knowing that is against University policy and to help their member of staff evade paying tax which is properly due on the claim, they allow the staff member to describe the travel as being for fictitious journeys away from the office. The Head of Department is knowingly allowing a member of staff provide false information on their expense claim to evade tax and is committing a criminal offence of assisting criminal tax evasion.