This is an excellent guest article from Michelle Reilly of 6CATS International about the impact of the Criminal Finances Act.
Rewind even a decade ago and the process of placing contractors on international assignments was considerably easier than it is now. Regulation was stripped back, the authorities weren’t as intent on catching potential tax evaders and the market was generally an easier place to operate in. However, governments around the world – including the UK – have upped the stakes and recognised the huge amounts that they’re losing through evasion every year. And, as a result they have introduced swathes of new legislation including the Common Reporting Standard, which allows the 100 plus nations signed up to automatically exchange tax information with each other about the professionals working within their borders. However, potentially the most impactful piece of legislation to be introduced in decades is found in the UK. But what does the Criminal Finances Act mean for agencies?
Essentially the new legislation means the stakes are raised for UK recruitment agencies regardless of where they are operating. From last month, any firm that is found to be facilitating tax evasion could be subject to criminal charges along with a potentially unlimited fine and a prison sentence. If that sounds serious – good – it is serious stuff and the risks are real. A consultant could place a contractor, almost anywhere, and lay the company’s directors open to this legislation. The directors do not have to condone or even know about it, they are still potentially liable. This is a piece of legislation that needs to be taken seriously by the recruitment industry.
To promote awareness of the legal changes we held a breakfast conference last month (in conjunction with Camino Partners and the lawyers Taylor Wessing) with some of the leading figures in the recruitment and compliance arenas. While many attendees were familiar with the legislation and how to prepare for it, from numerous reports it has become apparent that far too few firms are actually aware of the risks they’re now exposed to. GDPR is on the horizon and, while that is a potentially game-changing piece of regulation in itself, too many organisations are being blinded by it and have ignored the immediate risks created by the Criminal Finances Act.
In truth, the punishments are not limited to a fine or a prison sentence. Reputational damage would impact your ability to do business in the future. After all, how many organisations will realistically want to work with agencies or suppliers that have been sanctioned if they’re now aware that they too could be at risk of punishment? Along with that there’s the potential withdrawal of licenses by regulators and we all know how many hoops have to be jumped through to secure those. The bottom line is that it’s now more important than ever before to ensure that your processes and suppliers are up to scratch, that your workforce is aware of the changes and that there are no gaps where non-compliance could fall through the cracks.
Obviously, larger international organisations have more factors to consider, but HMRC will be on the hunt for firms of all sizes that they suspect might be breaking the tax laws, of the countries they operate in, or facilitating others to do so.
If you’re looking for guidance through this challenging and potentially intimidating transition then get in touch with the specialists before it’s too late. If you would like to see some excerpts from our recent compliance breakfast conference, featuring guests from the likes of Adecco, Spencer Ogden, Taylor Wessing and Phaidon International, then get in touch.
Michelle Reilly is CEO of 6CATS International, the leading supplier of international contractor management solutions to the recruitment industry