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Business Tax  •  Personal tax  •  Taxation

Will a business lunch constitute bribery after June 2011?

By RJP LLP on 30 March, 2011

Business owners should be mindful of changes to the Bribery Act that come into effect in the summer of 2011 which are designed to prevent ‘corporate bribery’.  These make it an offence if ‘commercial organisations’ fail to prevent bribery from taking place within their business relationships in the UK or abroad.  The Act also requires that business owners have ‘adequate procedures’ in place to improve governance and demonstrate their intentions to comply.

With London hosting the Olympic Games next year, it is an exciting and potentially very lucrative time for business owners.  Past experiences show that for companies involved in the construction, hospitality and tourism sectors in particular, there are exceptional opportunities to secure new contracts.

In brief, the new Bribery Act will make it a criminal offence to either offer, promise or to give an advantage or benefit to someone in the hope of obtaining an improper commercial benefit or indeed to request, receive or agree to receive such an advantage or benefit. Anyone found guilty of one of these offences could face up to 10 years imprisonment. More worryingly for businesses, a director or senior manager who either consents or 'turns a blind eye' to these offences being committed will also potentially commit the offences and could be found guilty, and indeed the business itself could be fined.

It is important to understand the Act’s amendments because certain types of corporate hospitality and gifts may be considered a bribe and may be illegal.  So a business lunch designed to cement relationships would be acceptable but lavish events hosted on the understanding that business would automatically ensue may be questioned as bribery.

One concern that companies dealing internationally have expressed is that they would be subject to more stringent regimes than some overseas competitors, which places them at risk in parts of the world where corruption is rife. There is also a very real threat of prosecution that will come from aggrieved competitors who feel they have been disadvantaged by what they suspect to be (real or imagined) inappropriate commercial relationships.

Small business owners in particular may find the costs of complying with the Bribery Act to be high.  Policies, procedures and budgets for corporate entertaining should be reviewed to ensure employees stay within the law. And looking ahead, internal policies to prevent/monitor potential bribery and staff training to understand the implications are advisable.  There are inevitably going to be many grey areas and a national event on the scale of the Olympics is certainly going to test the viability of the Act.

Find out more by reading the Government’s impending guidance about how to prevent bribery which has just been published.

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