Criminal Protection

Michelle Reilly, CEO of 6CATS International on The Criminal Finances Act 2017.

Criminal Protection

UK & Europe

The Criminal Finances Act 2017 (CFA) has certainly caused a lot of debate in the world of international contractor compliance. While HM Revenue & Customs has understandably taken this action in order to discourage tax fraud, the launch of this Act has created a level of confusion among recruiters as to what it actually means. In fact, in our joint survey with Camino Partners, we discovered that 43 per cent of firms are currently unaware of the potential impact the CFA could have on their business.

With huge risks associated with this latest legislation, it is crucial that agency owners act now to protect themselves and their firms. Here’s what you need to know. 


The Criminal Finances Act

In the first phase of the Act – which came in to force last year – it became a criminal offence to fail to prevent ‘associated persons’ from facilitating tax evasion. As a result, agencies that are incorporated in the UK could now face criminal charges as a direct result of the actions of any individual or entity, pretty much anywhere in the world, that provides a service to the company. 

The nature of this Act is such that agencies involved in contractor recruitment are at risk of significant criminal liabilities. Crucially, it is the ‘associated persons’ element of this regulation that creates an added level of complexity. This can leave agencies exposed to penalties unless they are able to demonstrate that they have put the required measures in place to prevent the facilitation of fraudulent activity. 

Phase two: what does it mean?

In the latest development – which came in to force as of 16th April – HMRC has been granted additional powers in order to help tackle fraudulent behaviour. Here are the key points of the phase two roll out that recruiters need to be aware of:

  • HMRC has now been granted further powers to help it identify and prosecute fraud, including the ability to seize property during investigations
  • Investigating officers have been given increased authority to search for and seize cash, including gaming vouchers fixed-value casino tokens and betting receipts
  • Officials have been granted the ability to force forfeiture of cash without obtaining a court order

How can you protect yourself and your agency?

It is clear that HMRC is stepping up its activity in the on-going fight against tax evasion, but the result is an increased risk for agencies that place contractors both within the UK and further afield. With the possibility of facing fines for the activity of your contractors, it is crucial that you put the right processes in place to protect your firm.

In the first instance, it is crucial that you get to know all parties involved in the contractual chain. While the connection to your firm might appear tenuous on the outside, to authorities, being part of this chain makes you liable as well. Having a preferred supplier list in place – with robust due diligence carried out – is certainly advisable.

It is also vital that you ensure the company paying the worker is declaring income in the country of work and, subsequently, that the correct taxes are being paid. In order to better ensure this is maintained, it is worth asking the owners of the management company to sign a commitment confirming that the payment solution provided is 100 per cent compliant in the country of work. Don’t be afraid to include confirmation in this commitment that the solution does not involve any form of tax evasion.

Finally, seeking expert guidance is certainly advisable, particularly given the layers of complexity surrounding this Act. If agency owners truly want to sleep peacefully at night, knowing your contractor compliance solutions are in good hands will certainly be beneficial. 



Supplier news


The Global Recruiter App