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Criminal Finances Act 2017 and its implications for recruitment agencies


Criminal Finances Act 2017 and its implications for recruitment agencies

The Criminal Finances Act (‘the CFA’), a legislation which will make recruitment agencies, along with other industry sectors, criminally liable for failing to prevent the facilitation of tax evasion offences in the UK or overseas, is set to come into force on 30 September 2017. 

What is the Criminal Finances Act 2017?

The Act will introduce two new offences:

1. The failure to prevent the facilitation of UK tax evasion offences (section 45)

2. The failure to prevent the facilitation of tax evasion overseas where such evasion is criminal under local law (section 46)

From 30 September, the new offences will make businesses vicariously liable for the criminal acts of their employees and other 'associated' persons who facilitate tax evasion whilst performing services for them, even if the senior management of the business was not involved or aware of what was going on.

The offences apply to both companies and partnerships and doesn’t not apply to natural persons i.e. individuals   

The legislation states “a relevant body is guilty of an offence if a person commits a UK tax evasion facilitation offence when acting in the capacity of a person associated with (it)”.

An ‘associated person’ can be an individual person or an incorporated body. A person who is an employee, agent or anyone who performs services directly for or on behalf of the relevant body. In the recruitment sector ‘associated person’ could include payment intermediaries such as umbrella companies, CIS intermediaries and similar third parties.  It could also include recruitment businesses in respect of the services they provide to clients.  

The guidance further states: ‘The onus will remain on the relevant organisation, where it seeks to rely on the defence, to prove that it had reasonable prevention procedures in place (or that it was unreasonable to expect it to have such procedures).

The CFA will also introduce a number of enhanced investigatory and recovery powers.


1. Unlimited financial penalties.

2.  Confiscation order or serious crime prevention orders.

3.  Obtaining a criminal conviction for any company will also have severe consequences (reputational, financial etc) including lost contracts.

When can facilitating tax-evasion occur in recruitment?

1. Tax payer commits a tax evasion offence such as a payroll company, contractor, or an individual.

2. An associated person of the relevant body, for example, consultants or any other person working for a recruitment company facilitates the tax evasion.

3. The recruitment company failed to prevent its representative/employee or agent from facilitating the tax evasion offence.

The above three steps will make the relevant body criminally liable under the CFA. The criminal standard of proof ‘beyond reasonable doubt’ will apply.

Six guiding principles by HMRC

In the draft guidance, HMRC has provided six guiding principles for businesses to consider when implementing reasonable prevention procedures:

1. Risk assessment- Include tax evasion risk assessments into your general risk assessment procedures.

2. Proportionality of risk-based prevention procedures - Prevention procedures, in order to be reasonable, will need to be proportionate to the risks that the organisation faces.

3. Top level commitment - Top-level management should demonstrate a commitment to preventing the facilitation of tax evasion offences.

4. Due diligence - The company will need to have due diligence procedures to analyse the risks of an associated person committing a tax evasion facilitation offence.

5. Communication (includes training) - Companies will be required to communicate, both internally and externally, its prevention procedures and policy against engaging in any activity which may facilitate tax evasion. This could also include internal training.

6. Monitoring and review - All companies will need to monitor and review their prevention procedures and make any improvements that are necessary.

What steps can recruitment agencies take to ensure they are prepared for CFA

Recruiters must have all the necessary information about their payroll partners; who they are and how they engage temporary workers/contractors. They will also have to consider if they will allow staff to claim commission for referrals to those companies and if as an organisation they will continue to receive referral payments.

• Recruitment agencies will need to conduct an internal process audit and review their current risk assessments.

• Conduct appropriate due diligence to identify any risks of an associated person committing a tax evasion facilitation offence.

• Train their staff and ensure that all recruitment consultants and the other employees understand the new offence and seriousness of the breach.

• Update policies, staff handbooks and contracts.

• Keep a regular check on the policies and how are they implemented.

At QX Recruitment Services, we ensure our clients are at the top of the game by keeping them up to date and compliant within the ever changing legislative environment. To know more about the recruitment services, finance and accounts and payroll solutions we provide, write to us at or call us on +44 845 838 2462 for a confidential and no commitment discussion.

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