There’s a bit of irony that the issue of tax avoidance and evasion could not be much higher profile at present while new rules which are intended, in part, to help address this have flown in under the radars of many UK companies.
The leak from Panamanian law firm Mossack Fonseca earlier this month saw the world’s media revealing (in most cases, perfectly legal) tax avoidance measures pursued by the world’s elite. Meanwhile, new legislation requiring nearly all UK companies to produce a Persons of Significant Control (PSC) Register also went live with relatively little fanfare, so much so that few firms seem to be aware of, let alone compliant with, the new rules.
Although there is no a direct link between the PSC Register and the wider debate about companies and individuals paying their fair share of tax, the register has been introduced partly to combat tax evasion through greater transparency by giving a full picture of the legal and beneficial ownership of UK businesses. It is also designed to help prevent money laundering and terrorist financing as well as give members of the public, including those who might be supplying goods or a services to a company, more information about the individuals behind it.
The rules are onerous, but in relation to individuals a PSC register will need to name all individuals within a company who have significant control within it through a range of criteria, including ownership of more than 25 per cent of the nominal share capital. It should also include any individual who can directly or indirectly control the appointment or removal of a majority of the board as well as anyone who has the overall right to exercise significant influence or control over the company.
Once that is determined, the PSC register must include information on each of the individuals from personal details including their name, service address, nationality, date of birth and usual residential address. It must also give details of the nature of the individual’s control that is exercised within the company.
Companies therefore now have a duty to take reasonable steps to find out if an individual or legal entity should be listed on their PSC register with consequences for failing to do so. There is potential for company directors to face a criminal prosecution for failing to respond to a request for a PSC register but that is likely to happen only in extreme situations. In the short term I would expect authorities to be fairly lenient but would equally expect they will harden their views towards non-compliance in a year’s time. The current maximum penalty of £5,000 for failing to file an annual return might serve as a useful guide to the initial penalty which could be applied for not maintaining a PSC register.
Given the lack of profile, it is hardly surprising these new rules have passed many companies by. However it is important that those which have not yet done so should now take action and ensure they accommodate this change on an annual basis, including PSC register requirements within their yearly planning, forecasting and overall business management processes.
To find out more about PSC download our Comment On here.