Recruitment firms ‘dangerously exposed’ to criminal sanctions

Recruitment firms are exposing themselves to potentially dangerous tax evasion and avoidance schemes which, after September 2017, could result in criminal sanctions for directors, according to 6CATS International.

The global leader in compliant contractor management commented in the wake of the case featuring Anderson Group, which The Guardian has accused of promoting dangerous tax avoidance schemes to its clients and which has led to questions in Parliament. 6CATS International has warned recruitment agencies that being connected to these types of schemes could result in individual directors facing criminal charges once the Criminal Finances Act comes into effect in September. The Act ‘creates corporate offences for cases where a person associated with a body, corporate or partnership facilitates the commission by another person of a tax evasion offence’, meaning that directors of recruitment firms could be handed prison sentences as a result of promoting evasion-related schemes.

Michelle Reilly, CEO of 6CATS International, comments.

“This case once again highlights that far too many hiring firms – and their individual directors - are dangerously exposed to potential criminal charges and have no idea of the risks they’re taking. There is still a huge lack of education around what breaking the tax law could actually mean for agencies and nowhere near enough recruitment company directors are actually aware that they could face prison charges for promoting non-compliant solutions to contractors. If they were, it’s likely that the number of illicit schemes would decrease drastically. From September new laws will be put in place and any firms found to be promoting or selling schemes that help their clients to avoid paying the right amount of tax are going to be in serious trouble, so it’s critical that they reassess what they’re offering now - before it’s too late.”

“We urge agencies to ensure they up their standards before the Criminal Finances Act becomes law. If they don’t it’s highly likely they’ll be caught out as HMRC is now so much more effective at identifying and shutting down evasion facilitating schemes than it ever has been. In the past, firms may have been able to get away with hiding their tax affairs in offshore accounts, but even this is becoming near-on impossible as states that were previously seen as ‘tax havens’, like Panama, for example, have committed to much higher international standards on tax affairs. Too many recruitment agencies still have their head in the sand when it comes to the potential severity of the punishments on offer, however come September we hope that more and more firms will begin to take compliance seriously.”