On 20 July HMRC published its consultation document on its new procedure for investigating tax fraud, called the Contractual Disclosure Facility (CDF). The deadline for responding to the consultation document has been extended to 30 September 2011.
Two key changes are being considered:
1. HMRC intends to investigate all levels of tax fraud using the CDF, irrespective of the amounts involved; and
2. will only offer immunity from prosecution for the offences admitted to.
The CDF and a new code of practice will replace Code of Practice 9 investigations. HMRC proposes to offer individuals it suspects of tax fraud the chance to admit the fraud and make an outline disclosure of the extent of the fraud within 60 days. In cases where fraud is admitted and the individual wishes to cooperate, HMRC intends to agree a suitable time frame for the taxpayer to certify and quantify the disclosure, via a disclosure report, where necessary.
Individuals who do not cooperate or make a false disclosure run the risk of a criminal investigation and HMRC will reserve the right to criminally prosecute, where appropriate.
What does this mean for you and your clients?
The CDF is to go live in early 2012. Individuals suspected of fraud will receive a letter, with a copy going to their advisers, stating that HMRC suspects tax fraud was committed and will offer the individual the opportunity to participate under the CDF. In order to seek the protection of the CDF, individuals need to admit that they committed tax fraud.
While the individual will be able to seek protection from a criminal investigation under the CDF, the admission of fraud means that they will face a higher penalty under the new penalty regime and HMRC will be able to go back up to 20 years, where necessary, to collect unpaid taxes. From a practical perspective, the admission of fraud may invalidate the client’s fee protection insurance.
More criminal Investigations to follow
To show it means business, HMRC has trained 200 new criminal investigators to investigate tax fraud. Individuals facing a criminal investigation will not be able to opt for or participate in the CDF.
Admission of fraud
The new CDF procedure relies on individuals admitting to fraud and should be considered very carefully due to the implications it has for the client. Specialist advice should be obtained to ensure you and your client get the best possible advice.
Gabelle specialises in representing people who are either suspected of tax fraud/evasion or wish to make a voluntary disclosure and has a proven track record of getting the best result for the client. Please contact John Hood on 020 7182 4747 or via email on firstname.lastname@example.org more information.