Civil tax evasion and the Contractual Disclosure Facility
In this article we look at a change in HMRC’s approach towards the civil investigation of fraud under the Contractual Disclosure Facility
We explain what to do if you receive a letter from HMRC under Code of Practice 9, which says you are:
- suspected of serious tax fraud
- invited to enter into a contract through something known as the Contractual Disclosure Facility
What is the Contractual Disclosure Facility?
The contractual disclosure facility is an opportunity to tell HMRC about any tax fraud you have been involved in.
It replaces the old Civil Investigation of Fraud procedures.
If HMRC write to you under the Contractual Disclosure Facility it is because they suspect serious tax fraud. Their letter will include
- An offer to enter the Contractual Disclosure Facility – a contract
- A copy of Code of Practice 9
- An acceptance letter
- A denial letter
- A disclosure form
It follows then that under the Contractual Disclosure Facility you have three options:
- Owning up to fraud via the Contractual Disclosure Facility
- Deciding not to own up to fraud – referred to as the denial route
- Not replying to HMRC – referred to as the non co-operation route
If you decide to take advantage of the Contractual Disclosure Facility, remember you are entering a binding contract with HMRC.
Under the terms of the contract HMRC will agree not to criminally investigate and prosecute you.
- Make a full disclosure of all taxes that you have deliberately evaded – known as formal disclosure
- Make this disclosure within 60 days of being offered the contract
- Sign a statement confirming that you have disclosed everything
- Pay all tax, interest and penalties due
- Stop all tax evasion immediately
The denial route
If you decide that you have no case to answer or simply deny any tax fraud. HMRC will work with you and your adviser to confirm that your taxes are up to date.
If irregularities are subsequently discovered you could find yourself subject to a criminal investigation with HMRC citing your denial as a deliberate intention to deceive.
The Non Co-Operation Route
If you do not reply to HMRC within 60 days notifying them of your intention to either accept a contract or deny any tax fraud, they will consider this non co-operation.
HMRC will begin either a civil or criminal investigation into the tax fraud they suspect you of having committed.
If your conduct is considered particularly grievous you could find yourself going to prison.
Voluntarily Disclose Tax Fraud
HMRC do not have to offer you a contract for you to be eligible for the Contractual Disclosure Facility.
If you have any questions regarding the Contractual Disclosure Facility or have received a letter offering you a contract, the you should seek advice from a tax investigation specialist without delay.