The waste management sector is “not prepared” for new legislation on tax evasion, which makes businesses criminally liable if they fail to prevent tax evasion, a tax expert at a top London law firm warned this week.
Under the UK Criminal Finances Act 2017, which came into force on 30 September, a company can be guilty of an offence if it fails to prevent tax evasion by members of its staff or an external agent, even if the business was not involved in the act or unaware of it.
Now, the law firm Simmons and Simmons has moved to alert the waste management sector to the potential implications of the Act and in particular the need for landfill operators to take notice of its requirements.
Simmons and Simmons has pointed out that the new corporate offence will affect landfill site operators “if fraud is committed on their sites which results in an under declaration of landfill tax, or any other taxes, to HM Revenue and Customs (HMRC)”.
And the firm noted: “A site operator or landowner could be found guilty if it fails to prevent an “associated person” such as its employees, or any other person who performs services on behalf of a company, in the facilitation of a landfill tax evasion offence. No criminal intent or knowledge by senior management is required. There is however a statutory defence for companies which have ‘reasonable’ prevention procedures in place.”
Nick Skerrett, partner and solicitor at Simmons and Simmons, explained: “The legislation covers anywhere where movements on a landfill site are not recorded, in other words classic cases of landfill tax fraud. This can include cash in hand, driving around the weighbridge, misclassification of waste etc.”
The law firm added that there is a statutory defence for companies which have “reasonable” prevention procedures in place. These “prevention procedures” include adequate risk assessment, board-level commitment, due diligence and monitoring and review.
Mr Skerrett continued: “The law affects the waste sector as well and it is not prepared for this. I don’t think it is even on the radar of some of the smaller landfill site operators. I am not getting a sense that they are as on top of things as the financial sector.
The issue is that as soon as something goes wrong, the HMRC can use this to beat people with, so companies really need to do their risk assessments and put adequate controls in place.”
According to Simmons and Simmons, the corporate criminal offence could lead to “unlimited financial penalties and disgorgement of profits”, as well as confiscation or compensation orders. And, convictions could be used to support exclusion from public contracts.
The law firm also stated: “We anticipate that if a landfill site operator is convicted of this new corporate offence it may impact on whether it will be considered ‘fit and proper’ under section 74 Environmental Protection Act 1990 and its eligibility to hold a waste management licence may be compromised in severe cases.”