What you need to know from a HR perspective.
Facilitation is already illegal, but the Criminal Finances Act makes the law far tougher and now employers and HR professionals are becoming aware of the implications. Did you know that an employer may now be criminally liable if their employee is aware that another employee or even a customer is evading tax, but nothing was done?! If found guilty, employers are at risk of an uncapped fine as well as associated reputational damage.
When is an offence committed?
An employer can be liable when:
- There has been criminal tax evasion by a taxpayer, and;
- An employee (or a representative of the employer/organisation) has facilitated the evasion in accordance with the Accessories and Abettors Act 1861, and;
- The employer failed to take appropriate steps to prevent the employee (or representative) from committing the facilitation.
What does this mean for employers?
Organisations should be able to demonstrate that they have put reasonable procedures in place to prevent it from happening. On the flip side, if it is not appropriate or unreasonable for an organisation to be expected to have prevention procedures in place, then this would have to be demonstrated instead.
Seven practical steps to demonstrate prevention:
- Risk Assessments: Identify where exposure is most likely
- Measures: Consider what can be put in place to limit the risks
- Policies: Implement a relevant policy or update a whistle blower policy
- Procedures (reporting and company statements): Communicate clear reporting procedures and consider the benefits of issuing an internal and external company statement.
- Contracts: Consider the nature of the business and whether it is appropriate to update template contracts or even issue a variation to terms letter (for employment and services).
- Handbooks: These provide a permanent source of information for employees to learn and refresh themselves on their employer’s expectations. Updating a relevant section or adding comments on this matter may be straight forwards and highly appropriate.
- Internal Communications: Sometimes essential information can be lost amongst a wealth of policies. It is wise to arrange separate communications to draw focused attention to this matter. This may take the form of: a staff meeting, training, a company-wide e-mail or letter to everyone, etc.
Remember to keep evidence of the steps you have taken to raise awareness and promote prevention.
Finance (No.2) Act 2017 and the impact on notice pay and termination payments.
Post-Employment notice pay (PENP) in brief.
PENP arises when an employee receives no notice, or less notice than is due to them when their employment is terminated. It represents how much basic pay the employee would have received if they had worked the full notice period which they are/were entitled to. Whenever an employee is going to receive less notice than they are due (either statutory or contractual), payroll should be informed so that they may calculate whether there is any post employment notice pay (PENP) which will need to be subject to tax.
- Informing payroll: Do not assume payroll teams or software will pick this up. Anyone processing payroll must be informed when an individual is receiving less notice than they are due, so they can calculate PENP.
- Settlement agreements: Regardless of whether there is a pay in lieu of notice (PILON) clause in a contract, any termination payment will always be assumed to have an amount in respect of an entitlement to notice pay contained within it. This amount will be subject to tax.
- Contractual clauses: The benefit of leaving out a PILON clause has now gone. Therefore, choosing to leave it out only leaves you with the possible disadvantages. This may include being in breach of contract. The HMRC have set up a new statutory calculation for this which is applicable to “relevant termination awards”.
If you would like to know more information, there is a webinar available through IAM preferred partner HR solutions, which you can sign up to here