HMRC initiates first corporate prosecution under "failure to prevent" tax evasion laws

HM Revenue & Customs (HMRC) has initiated its first corporate prosecution under the "failure to prevent the facilitation of tax evasion" offence, introduced by the Criminal Finances Act 2017 (CFA 2017). This development marks a significant shift in HMRC's enforcement approach, which has faced mounting criticism for failing to use these powers since their introduction eight years ago.

Background

The CFA 2017 established two corporate offences:

• Section 45: Failure to prevent the facilitation of UK tax evasion.

• Section 46: Failure to prevent the facilitation of foreign tax evasion (with a UK nexus).

These offences impose strict liability on companies, partnerships, and other bodies corporate. If an associated person (eg employee, agent, contractor) criminally facilitates tax evasion, and the organisation has not implemented reasonable procedures to prevent such facilitation, the organisation may be held criminally liable. Crucially, there is no need to prove intent or awareness by senior management. Upon conviction, companies face unlimited fines.  Aside from the implications of a prosecution, or resulting regulatory action, the adverse publicity generated by a prosecution is likely to damage the reputation of the business concerned and impact negatively on the profitability of the business.

Recent prosecution

Bennett Verby Ltd, a Stockport-based accountancy firm, has been charged, under section 45 of the CFA 2017, in connection with an alleged R&D credits repayment fraud. Additionally, six individuals, including a former director of the firm, face charges related to cheating the public revenue and money laundering. All appeared in Manchester Crown Court on 7 August 2025 but did not enter pleas. A provisional trial date is set for 27 September 2027.

Implications for businesses

This prosecution signals HMRC's renewed commitment to enforcing the "failure to prevent"' offences. Organisations should review and, if necessary, strengthen their compliance procedures to mitigate the risk of facilitating tax evasion. Implementing reasonable procedures, as outlined in HMRC's guidance, can serve as a defence against liability. Some top tips for businesses include:

• review existing risk assessment: continue to identify areas of your business vulnerable to tax evasion facilitation, including third-party relationships, overseas operations, and high-risk transactions

• implement reasonable procedures: develop and enforce clear policies, controls, and training programmes aimed at preventing facilitation of tax evasion, aligned with HMRC’s guidance

• train employees and associated persons: regularly educate employees, contractors, agents, and other associated persons about tax evasion risks and their role in prevention

• monitor and review controls: establish ongoing monitoring processes and conduct periodic reviews of your procedures to ensure they remain effective and fit for purpose

• promote a culture of compliance: foster an ethical culture with clear tone-from-the-top messaging and encourage whistleblowing and reporting of suspicious activity

• engage legal expertise: consult with legal professionals with appropriate expertise to tailor your compliance programme and keep abreast of evolving regulatory expectations and enforcement trends

• document everything: keep detailed records of risk assessments, policies, training, and investigations as evidence of reasonable procedures in the event of an investigation or prosecution.

We are able to assist you with your compliance obligations. RPC is a leading law firm with extensive experience in both contentious tax and financial crime matters. Dealing with contentious tax and financial crime issues is a specialist area demanding a high degree of expertise.  For further guidance on implementing effective compliance procedures or responding to an HMRC investigation, please contact Adam Craggs or Michelle Sloane.