The new offences relating to the facilitation of tax evasion in the Criminal Finances Act 2017 are the latest development in a line of new laws which extend the jurisdiction of UK legislation beyond our national borders.
Echoing the terminology of the Bribery Act 2010, and the Modern Slavery Act 2015, the Criminal Finances Act applies to both tax evasion offences committed within the UK and foreign tax evasion offences – that is, actions to evade foreign taxes which would be regarded as a UK tax evasion offence if the act were committed in the UK.
With the blurring of scope across borders, the question arises: where is the line?
Who do the Acts apply to?
The Bribery Act
A relevant commercial organisation may be liable under the Bribery Act for failing to prevent acts of bribery by a person associated with that organisation.
A “relevant commercial organisation” here means either:
- a body which is incorporated under the law of any part of the UK and which carries on a business (whether there or elsewhere); or
- any other body corporate (wherever incorporated) which carries on a business, or part of a business, in any part of the UK.
The Modern Slavery Act
This Act requires certain “commercial organisations” to publish an annual ‘slavery and human trafficking statement’ relating to the steps taken by the organisation to eliminate slavery from their businesses and supply chains.
A “commercial organisation” here is a body corporate (wherever incorporated) which carries on a business in the UK. This is similar to the Bribery Act definition.
The Criminal Finances Act
The new Act applies to a body corporate “wherever incorporated or formed”; a much broader definition. However, the offence of failing to prevent the facilitation of foreign tax evasion, is limited to companies either incorporated in the UK, carrying on business in the UK, or where the offence is committed within the UK.
What does “carrying on business in the UK” actually mean?
The definitions in each Act have a key similarity: the concept of “carrying on business” in the UK. Although the definition seems simple enough, it is clear from guidance and case law that it is intended to be interpreted more widely.
The Criminal Finances Act has not yet been tested in the courts, but the words used are similar to those in the Financial Services and Markets Act 2000. Guidance produced by the Financial Conduct Authority relating to that Act suggests that a person may be “carrying on activities within the UK” even if they do not have a permanent place of business here. An example given is a company providing services within the UK via the internet or the telephone.
This very situation was seen in a case where the Court of Appeal stated that “it is sufficient if the activities in question which took place in this [UK] jurisdiction were a significant part of the business activity… [and] of sufficient regularity and substance to constitute the carrying on of business”.
The concept is deliberately vague and its application will be fact dependent. For example, whilst having an office situated in the UK would tend to indicate that a foreign company is “doing business” here, the presence of a dormant subsidiary may not. A UK-based director working part-time for a foreign company from leased offices may also be a sufficient connection to the UK under the Acts.
These Acts highlight the global nature of our corporate world, and the importance for foreign companies in particular to consider whether or not they are caught under this new breed of “long arm” legislation.
 Financial Services Authority v Fradley & Woodward  EWCA Civ 1183