HMRC’s Failure to Prevent Fraud crackdown “a watershed moment for the accounting profession” 

The first prosecution is underway, and more could be coming. Are your risk assessments in order? 

HMRC’s decision to bring its first-ever corporate prosecution under the failure to prevent the facilitation of tax evasion offence is a watershed moment that marks a significant shift in the tax authority’s enforcement approach.  

In August, HMRC charged aStockport accountancy firm, Bennett Verby Ltd, with failing to prevent the facilitation of UK tax evasion in connection with an alleged research and development tax credits fraud.  

The case is the first prosecution since the offence was introduced eight years ago in the Criminal Finances Act 2017 and follows heavy criticism of HMRC’s apparent unwillingness to use the power.  

“The failure to prevent agenda is about changing behaviour at least as much as it is getting heads on spikes. But to have a credible deterrent you have got to occasionally have a head on a spike,” says John Binns at BCL Solicitors LLP. 

“It doesn’t work at all if is toothless and this case matters for that reason.” 

Crucial test case for further prosecutions 

Six individuals, including a former director at the firm, also face charges related to cheating the public revenue and money laundering. A provisional trial date is set for September 2027. 

Although Bennett Verby isn’t the prominent corporate entity many anticipated HMRC would pursue, this prosecution stands as a crucial test case that will clarify how the law is applied in court.  

The choice of an accountancy firm for the first prosecution is in keeping with HMRC’s continued crackdown on professional enablers. But Christopher Young at Kennedys Law LLP says the case should not be viewed as something that is only relevant to professional service firms.  

“There is no doubt that the case will be heavily scrutinised as it’s firmly believed that should HMRC secure a prosecution, we will see a significant increase in their appetite to pursue further prosecutions as soon as possible,” he says.  

Investigations moving from individuals to corporates

The case also “signifies a step change in HMRC’s approach to criminal fraud investigations”, says David Sleight, a criminal litigation partner at Kingsley Napley LLP. 

HMRC has historically focussed on investigating and prosecuting individuals rather than corporates. But according to an HMRC information release on 30 June 2025 there are currently 38 “potential” corporate criminal offence investigations underway under the 2017 Act, in addition to Bennett Verby case. 

“Whether this case will open the flood gates for multiple prosecutions remains to be seen, but with 38 cases currently being and more to follow, accountancy and other professional service firms are certainly in the firing line,” Sleight says.  

Corporate obliviousness no longer a defence

The only defence available to a firm is to be able to demonstrate that:

• it had in place reasonable procedures to prevent the facilitation of tax evasion, or
• having no procedures was reasonable in the relevant circumstances. 

Ty Francis, Chief Advisory Officer of LRN Corporation, says this prosecution “could be a watershed moment for the accounting profession” and “sends a message that corporate obliviousness is no longer a defence.” 

“It shows that HMRC isn’t afraid to hold professional firms to account, and that the burden of proof is shifting as now firms must now show they had reasonable prevention procedures in place, not that they were unaware of wrongdoing,” Francis says. 

Risk assessments are essential

Sleight says accountants and other professional advisors should take stock and make sure that they have the appropriate procedures in place to protect themselves. 

The “absolute priority” for an organisation, says Sleight, is to make sure that it has carried out a bespoke risk assessment to identify the issues relevant to its specific business. 

“This assessment should not be limited to considering the types of services and advice that the firm or its employees provide but must involve a proper analysis of all work carried out by associated persons including service providers, agents, suppliers and customers,” he says.  

Demonstrate compliance – don’t just claim it 

Young also advises firms to make sure they are giving due consideration to compliance programmes and that they are fully integrated and followed within the business from the top down.  

He says he has witnessed businesses that believe they have a strong compliance programme simply because they have multiple compliance related documents. 

However, these “are usually stored on a largely unvisited page on the businesses intranet or on a shelf in the office of the head of compliance.”  

“Whilst it is obviously important to have all of those documents, they can be rendered obsolete if they are not up to date and being followed by all within the business,” he says. 

Changing enforcement landscape

The case comes with corporate criminal offences under the spotlight. It must be considered in the wider context of several key legislative and policy changes that have created a more assertive enforcement landscape. 

These include:

• the landmark enactment of the failure to prevent fraud offence under Economic Crime and Corporate Transparency Act 2023,
• Companies House implementing new powers to verify identities, and
• the Insolvency Service planning to undertake more economic crime enforcement.  

“It’s fair to say that we are seeing a much more aggressive approach being taken by enforcement agencies,” says Young.  

Whether that is from HMRC, Companies House or the Serious Fraud Office – which has itself vowed to pursue companies using the expanded failure to prevent regime – Young says there appears to be an increase in appetite to move quicker to start a prosecution. 

“This appears to be the latest example of an enforcement agency demonstrating this appetite in practice,” he says. 

It also coincides with an overhaul of how compliance will be supervised in the UK, as the Financial Conduct Authority prepares to take over anti-money laundering supervision of law firms and accountants. AAT covers the details of those changes here.

“The Bennett Verby prosecution and the FCA’s expanded remit are two sides of the same coin as both show that regulators now expect firms to demonstrate compliance, not just claim it,” says Francis at LRN. 

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.