UK Criminal Finances Bill has ‘significant implications’ for Cayman

Two new corporate criminal offenses for the facilitation of tax crimes, introduced by the U.K. Criminal Finances Bill, will affect Cayman service providers that have U.K. clients or another nexus to the U.K.

Representatives from the U.K.’s HM Revenue and Customs explained the application of the proposed law at an event hosted by Cayman Finance and the Ministry of Financial Services in March.

The bill targets cases in which professionals deliberately help clients commit tax fraud and the corporate entities they work for turn a blind eye to the actions of their employees or agents.

Jennifer Haslett, the Corporate Crime and International Engagement Lead at HMRC, said, “The key message is your business does not need to be based in the U.K., it does not need to be headquartered in the U.K., it does not even need to have an office in the U.K. to be in the scope of this offense.”

To avoid criminal liability, organizations must put in place reasonable procedures to prevent fraud by its staff and service providers should carry out a risk assessment of how their services could be used to facilitate financial crime, Ms. Haslett said.

Jude Scott, CEO of Cayman Finance, said, “If the proposed U.K. Criminal Finances Bill is passed, it could have significant implications on the Cayman Islands as a jurisdiction and on businesses within the local financial services industry.

“Cayman Finance therefore saw the importance to provide a platform for information sharing and open discussion between HMRC and our local financial services industry,” he added.

Nicholas Warrington, assistant director and economic and policy adviser in the HMRC offshore evasion team, outlined the various tax disclosure facilities that the U.K. has offered taxpayers to declare previously untaxed income or assets. Beginning in 2007 with the Offshore Disclosure Facility and the new Disclosure Opportunity in 2009, it included tax cooperation agreements with Liechtenstein and Switzerland and another disclosure facility in 2016.

Given the multiple opportunities offered to tax evaders to come forward over the years, they will now face a new package of sanctions. “Things are going to get tougher,” Mr. Warrington said.

But he also acknowledged that research of data from the disclosure facilities found that the media perception of tax evasion does not match what is really happening. The high majority of taxpayer disclosures involved either family members living abroad or businessmen who had reasons to have tax structures, he noted, which was a very different situation from “stashing cash in suitcases.”

Many of the taxpayers who disclosed previously undeclared income did not consider themselves evaders, he added.

In the future, the common reporting standard, a system for the exchange of tax information between more than 100 countries, will give HMRC information on a much wider range of products, and it will help investigators to focus on those who want to break the law, he noted.

“This was a great opportunity for HMRC to develop our already strong relationship with the Cayman Islands on tax transparency,” the HMRC representatives said. “The event will help raise awareness of how the new legislation will work in the interests of honest taxpayers everywhere.”

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