In a landmark moment for corporate crime enforcement, HM Revenue & Customs (“HMRC”) has brought the first-ever charge under the UK’s Corporate Criminal Offense (“CCO”) of failure to prevent the facilitation of tax evasion.
Introduced by the Criminal Finances Act 2017, the CCO holds companies criminally liable if they fail to prevent employees or associated persons from facilitating tax evasion. The first charge of this offense signals a shift in the UK’s approach to corporate accountability and sets a precedent for future enforcement.
The Case in Brief
On August 7, 2025, HMRC charged Bennet Verby Ltd., a Stockport accounting firm, under the CCO in connection with an alleged research and development (“R&D”) tax repayment fraud. In addition, six individuals were charged with related offenses, including money laundering and cheating the public revenue.
Notably, news of the charges came not via an official HMRC announcement, but through investigative reporting by The Bureau of Investigative Journalism – the same organization that previously scrutinized HMRC’s lack of enforcement under the CCO.[1] This raises questions about transparency in revenue enforcement and highlights the role of independent journalism in holding institutions to account.
Understanding the Corporate Criminal Offence
The CCO applies to corporations and partnerships with a UK nexus, including UK and non-UK companies, limited liability partnerships, and incorporated charities. Sole traders and unincorporated associations fall outside the scope of the regime.
The legislation introduced two distinct offenses: (i) failure to prevent the facilitation of UK tax evasion; and (ii) failure to prevent the facilitation of foreign tax evasion.
To secure a conviction, the prosecution must prove:
- A person associated with the company (eg., an employee, agent, contractor) criminally facilitated tax evasion;
- Through conduct that is a criminal offense under UK law; and,
- The company failed to prevent the facilitation; including by, for example, failing to institute “reasonable” prevention procedures.
As this is a strict liability offense, the company does not need to have approved, intended, or even known about the criminal conduct. The company must then prove a statutory defense, either that:
- It had reasonable prevention procedures in place; or
- It was not reasonable in the circumstances to have procedures in place to prevent the type of facilitation that occurred.[2]
Why Did HMRC Choose R&D Tax Relief Fraud for the First CCO Case?
When the CCO came into force, HMRC gained a wide remit for prosecutions, with potential targets including offshore income concealment, VAT carousel fraud, payroll fraud, false invoicing to disguise taxable profit, and the under-declaration of land transactions to facilitate Stamp Duty Land Tax fraud.[3]
Given this range, the decision to employ the new legislation against an R&D tax relief fraud – rather than a more traditional evasion model – warrants scrutiny.
R&D tax relief provides an incentive to innovate by offering tax deductions or payable tax credits for qualifying R&D expenditures such as staffing costs, materials used in research, and software purchases directly related to R&D projects.[4] Claims are often prepared with the help of specialist advisers such as the defendant accounting firm Bennet Verby Ltd.
So why did HMRC select R&D fraud for its first CCO prosecution?
- Strategic Impact: The R&D tax relief scheme is one of largest corporate tax relief schemes, with over £7 billion claimed in recent years. It is also high-risk: HMRC estimated that in the 2021-2022 tax year £1.3 billion – 17.6% of total claims made under the scheme – was lost to error or fraud.[5] This has drawn political scrutiny, with the House of Lords calling for reform and the UK government labelling the fraud levels “clearly unacceptable.”[6]
- Strong Evidence Trail: As R&D claims typically involve detailed documentation – engagement letters, fee agreements, technical reports, and formal submissions to HMRC – there is a plethora of evidence to support a landmark prosecution.
- Targeting Professional Enablers: By focusing not on the claimant company but on a professional adviser, HMRC can send a deterrent message to the advisory sector, which handles a vast number of R&D claims annually, without the political complications of prosecuting an innovative business.
In short, the scheme’s scale, visibility, and documentation made it an ideal candidate for HMRC’s first use of the CCO – undertaken to maximize public impact and establish deterrence.
The Significance of the Charge
Application of the CCO means enforcement is no longer theoretical: firms can be held criminally liable for tax evasion facilitated by employees or third parties – even without senior management’s knowledge or intent.
For HMRC, this case reflects years of groundwork aimed at combatting corporate inaction. For businesses, it reinforces the need to focus on staff training and to implement strong internal controls, including whistleblowing mechanisms.
Yet the timing is odd. Why has it taken HMRC nearly eight years to bring a charge under legislation that came into force in September 2017? Several factors likely contributed:
- As a strict liability offense, the CCO requires HMRC to prove both the underlying criminal evasion and the company’s failure to prevent it – demanding extensive evidence.
- With limited resources and multiple economic crime threats, HMRC likely focused on more clear-cut or higher-impact cases first.
- Without prior case law, HMRC may have waited for a case with strong facts and documentation to pursue a first prosecution.
Lessons for Businesses
As the only statutory defense is to show either (i) that reasonable prevention procedures were in place or (ii) that it was not circumstantially reasonable to expect such procedures, this is a clear signal for firms – especially those in high-risk sectors like professional services – to review their exposure.
A New Era of Corporate Accountability?
As all signs indicate that HMRC will employ the CCO assertively, the message is clear: companies must act, as ignorance or inaction are no longer shields. In failing to prevent tax evasion, companies risk criminal liability, reputational damage, and financial penalties.
Is this a harbinger of a broader enforcement shift? In April 2025, the Serious Fraud Office charged United Insurance Brokers with failure to prevent bribery – potentially the first jury-tested case under the Bribery Act since 2018. In September 2025, the new “failure to prevent fraud” offense under the Economic Crime and Corporate Transparency Act will take effect, making large organizations liable if they fail to stop employees or agents committing fraud for their benefit.
Together, these developments signal a shift from reactive enforcement to prospective prevention. Caution to the business that fails to review its internal controls environment to ensure it is prepared to face the coming era.
[1] https://www.thebureauinvestigates.com/stories/2025-08-07/hmrc-charges-first-company-ever-under-landmark-tax-evasion-powers; https://www.thebureauinvestigates.com/stories/2024-01-20/hmrc-charges-no-companies-for-tax-evasion-in-six-years/
[2] https://www.legislation.gov.uk/ukpga/2017/22/part/3/enacted
[3] By exploiting cross-border VAT rules, particularly within the EU, VAT carousel fraud generates fraudulent VAT refund claims through a series of transactions where goods are repeatedly imported and exported between companies.
[4] https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises; https://www.hmrc.gov.uk/gds/cird/attachments/rdsimpleguide.pdf
[5] https://www.gov.uk/government/publications/hmrcs-approach-to-research-and-development-tax-reliefs-2023-to-2024/approach-to-research-and-development-tax-reliefs-2023-to-2024
[6] https://committees.parliament.uk/publications/43082/documents/214705/default; https://assets.publishing.service.gov.uk/media/6721199c4da1c0d41942a8bd/Corporate_Tax_Roadmap.pdf
