Update from RYA Legal

THE CRIMINAL FINANCES ACT 2017

This Act introduced two new corporate offences in relation to money laundering. The 4 year anniversary of its introduction is fast approaching.

It applies to a corporate entity or an incorporated partnership referred to in the Act as a “relevant body”. The offence is committed if a “relevant body” fails to prevent “Associated Persons” from facilitating tax evasion, in the UK and abroad, by a third party.   “Associated Persons” include any person or entity that provides services “for or on behalf of “the “relevant body”. As such it covers employees as well as any agents, intermediaries, subsidiaries, joint venture partners or any other associated third party which is likely to include volunteers.

Risk Assessment:

It is therefore crucial that incorporated clubs analyse the risks before entering into new commercial arrangements, this would include the nature and extent of any exposure to those who may facilitate any tax evasion, whether it carries a risk and, if so, how to mitigate it; whether the country the services are being provided in is high risk in terms of tax evasion; and whether certain transactions, markets and sectors are likely to be higher risk.

Defence:

The defence available for a relevant body is to show that it had put “reasonable procedures” in place to prevent a breach or that it was not reasonable in all the circumstances to expect it to have any prevention procedures in place.

HMRC has published a guidance note to help businesses understand the processes and procedures that can help mitigate the risk of and prevent any potential breach.  The attached note prepared by our retained tax consultant ,Richard Baldwin, provides further details.

Penalty:

The penalty is an unlimited fine but an incorporated club must factor in the associated reputational damage that would accompany a breach of the Act.

Recommended Action:

HMRC are carrying out live CCO investigations across all sectors and sizes of company. Incorporated sailing clubs that haven't carried out a risk assessment and put procedures in place, as appropriate, should do so now.

TAX SCAMS

HM Revenue and Customs (HMRC) has issued a warning on the rising prevalence of cyber and telephone tax scams. 

Top tip:

It is warning people to be careful if they are contacted out of the blue by someone asking for money or personal information. The department sees high numbers of fraudsters emailing, calling or texting people claiming to be from HMRC. If in doubt, HMRC advises people not to reply directly to anything suspicious, but to contact the department straight away and to search GOV.UK for ‘HMRC scams’.

Is it a scam?

You can be sure that HMRC won’t ring out of the blue threatening your arrest. But if someone contacts you claiming to be from HMRC, it could be a scam. The department will only ever call asking for payment on a tax or tax credit debt that you already know about, usually through a letter (or your Self Assessment tax return).

Tax scam numbers

 In the last year, HMRC: 

• received 1,048,396 referrals from the public about suspicious contact, nearly half offering bogus tax ‘rebates’ or ‘refunds’
• worked with the telecoms industry and Ofcom to remove nearly 2,460 phone numbers being used to commit tax phone scams
• received 441,954 reports of phone scams in total, 117% up on the previous year
• reported more than 13,315 malicious web pages for takedown
• detected 462 COVID-19 financial scams, most by text message
• asked internet service providers to take down 441 COVID-19 scam web pages.

   

  Many scams mimic government messages to so that they look authentic and reassuring. HMRC is a familiar brand, which criminals abuse to add credibility to their scams.

   

  The main things to look out for

• Is the contact unexpected?
• Does it offer a refund, rebate or financial support?
• Does it ask for personal information?
• Is it threatening?
• Does it ask you to transfer money?

Criminals are usually trying to steal your money or your personal information to sell on to others. Links or files in emails or texts could also download dangerous software onto your machine or phone. This could gather your personal data or lock your machine until you pay a ransom.

If you are contacted out of the blue by someone claiming to be from HMRC, by phone, email or text, it is therefore important to ask yourself the questions above before you respond.

If you aren’t sure about the identity of a caller, HMRC recommends that you do not speak to them.

HMRC’s advice

Stop: 

• Take a moment to think before parting with your money or information. 
• Don’t give out private information or reply to text messages, and don’t download attachments or click on links in texts or emails you weren’t expecting.
• Do not trust caller ID on phones. Numbers can be spoofed.

Challenge: 

• It’s ok to reject, refuse or ignore any requests - only criminals will try to rush or panic you.
• Search ‘scams’ on GOV.UK for information on how to recognise genuine HMRC contact  and how to avoid and report scams. 

Protect:

• Forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599. Report scam phone calls on GOV.UK. 
• Contact your bank immediately if you think you’ve fallen victim to a scam, and report it to Action Fraud (in Scotland, contact the police on 101).

HMRC’s fight against cyber and phone criminals

HMRC prevents scams by:

• automatically spotting most cyber tax scams before the public reports them

   

• using ground-breaking technologies to prevent misleading and malicious communications ever reaching our citizens
• helping to warn the public by sharing details and examples of genuine and scam communications on GOV.UK
• making it easy for people to report tax scams: at phishing@hmrc.gov.uk, 60599 for texts, and using a suspicious phone call reporting form on GOV.UK
• tackling misleading websites designed to make people pay for services that should be free or low cost
• working closely with national and international law enforcement organisations
• sharing warnings with media.

Where to find more advice

The National Cyber Security Centre offers a range of helpful advice on how to keep secure online at CyberAware.gov.uk.

£5m SPORT ENGLAND ACTIVE TOGETHER CROWDFUNDING PARTNERSHIP

In response to the financial difficulties experienced by grass roots sports organisations sports clubs have received a boost from Sport England which is investing £5 million of National Lottery funding into its partnership with Crowdfunder. The Return to Play: Active Together Fund will match funds raised by a sports club from its supporters using the Crowdfunder’s website. This builds on a successful collaboration with Crowdfunder which has helped 475 sports clubs raise over £7.1 million since May 2020.

All sports clubs, charities and other community organisations which deliver sport in England are able to apply for up to £10,000 in match funding for approved projects. Similar collaborations to provide funding are being replicated with other home country sports councils.

Donations to sailing clubs via the Crowdfunder platform may not only attract match funding but may also be eligible for gift aid rebates from HMRC if the club is a registered charity or Community Amateur Sports Club. This can add a further 25% to the amount the individual supporter donates. Crowdfunder can assist with gift aid claims by registered clubs.

Many clubs in all sports, including sailing, have already taken advantage of this offer. For example, London Corinthian Sailing Club raised nearly £26,000 plus an estimated £3,700 in gift aid in August 2020 using Crowdfunder in order to purchase a set of training dinghies. This allowed the club to start teaching people to sail and get active on the water.

Further details of the Sport England match funding can be found on Sport England’s website under The Return to Play: Active Together Fund.  Sailing clubs looking to fundraise to improve their facilities or sailing offer should actively consider using the Crowdfunder platform to access match funding.

CORONAVIRUS BUSINESS SUPPORT GRANTS – TAX UPDATE

Government Coronavirus business support measures are coming to an end but the tax issues resulting therefrom continue to challenge clubs. These include difficulties with corporation tax (CT) on Local Authority business support grants (LA grants).  Our recent webinar “Introduction to Corporation Tax” explained that CT could be taxable on the LA grants in full even though the majority of a club’s income may not be taxable. One exception is where the club is trading mutually with its members in which case a part/all of the grant may not be taxable.

Many clubs have incorrectly assumed that the exception applies as they are mutual traders. Unfortunately this is often not the case because member income is generally not trading income and even if it is the conditions for mutual trading may not be satisfied e.g. surplus assets on dissolution do not go to the members but to a community based sports organisation or activities.

We recommend that clubs review CT returns already filed for their treatment of LA grants and bear this in mind for any returns not yet filed.  RYA affiliated clubs have access to a tax consultant, Richard Baldwin MBE; FCA; CTA, who has been working with us on CT issues. We provide a free 30 minute consultation with Richard on CT which can be accessed via the Legal Department.