Happy Birthday to the Criminal Finances Act!

…and how recruitment agencies can remain on the right side of the law.

The Criminal Finances Act (CFA) was introduced in 2017 to clamp down on businesses which failed to prevent the practice of tax evasion within their organisation – and this week marks the start of the legislation’s second year.
Tax evasion, and aiding others’ tax evasion, are serious criminal offences, and the CFA represents a firmer stance on tax fraud by the Government, in a bid to shift the landscape of corporate culture.

As a result of the CFA, HMRC now have the capacity to investigate and prosecute companies who’ve ‘not done enough to prevent their staff from intentionally helping others to evade taxes, even if the senior management of the business were uninvolved or unaware of what was going on.’

The change in the law impacted all companies involved in the referral of taxpayers to financial, payroll or accountancy solutions, including recruitment agencies. Corporations and partnerships are now criminally liable if they fail to prevent their employees, agents, or others who provide services on their behalf, from criminally facilitating tax evasion.


How does the Criminal Finances Act affect recruitment companies?

If a recruitment consultant refers a client to a non-compliant umbrella company, accountant, or payroll provider, where the taxpayer doesn’t pay the correct amount of tax, the recruitment agency could be found guilty of failing to prevent the evading of tax.

Examples of tax evasion by non-compliant providers can include: failing to inform HMRC about taxes they owe (e.g. on business profits), keeping business ‘off the books’ by dealing in cash and not giving receipts, and hiding money, shares or other assets in an offshore bank account. This is known as ‘offshore tax evasion’.

Under the CFA, an agency cannot feign ignorance as a viable defence. It’s not enough to simply say that you were unaware of what the consultant was up to. However, a business does have a defence if it can show that it had reasonable preventative procedures in place. And, it’s not just recruitment agencies that can fall foul of the regulations. Earlier this year, 27 of the UK’s biggest businesses were referred to HMRC, as investigations were opened into potential, “serious” tax evasion.


What can recruitment agencies do to remain compliant?

To reduce risk, recruitment agencies need to ensure that the companies they choose to associate with are reputable providers, acting strictly within the law. It is important to be able to show that you have reasonable procedures in place to prevent an offence being committed, such as regular reviews and risk assessments.

Here’s Danbro’s four-point plan to ensure you stay on the right side of the law:

  1. Put together a list of preferred suppliers.
  2. Refine your list and make sure that each provider you work with meets the necessary criteria to keep you compliant … and lawful.
  3. Ensure that you’ve done your due diligence on everyone that you or your consultants refer to.
  4. Review the working practices that are in place for third parties. If your consultants are personally receiving incentives for referrals, it is essential that the income is disclosed by means of a personal tax return, to avoid charges of tax evasion for the consultant, or the agency.


Make sure you’re protected – compliance is key when it comes to paying tax!

For advice or support in putting together a preferred supplier list, or to find out how Danbro can help keep your agency compliant, get in touch today on 01253 600 140, or read our free guide in full.

Blog written by
Sam Wright
Marketing Manager at

Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.

His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.

He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.

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