A Contractual Disclosure may be used when HMRC suspects fraud with a view to prosecution. HMRC will issue, in selected cases, a Code of Practice 9 where they suspect tax fraud. In many cases, they will carry out criminal investigations on the alleged fraud. Investigations are usually done to make a case to prosecute.
At this point, HMRC will offer you the opportunity to make a full disclosure under a contractual arrangement. This is called a Contractual Disclosure Facility (CDF). You will then have 60 days within which to respond once the HMRC CDF offer has been made. During a Contractual Disclosure Facility/HMRC cdf, if full disclosure of your deliberate conduct is made, then the HMRC will not pursue a criminal investigation with a view to prosecution. If you sign and agree to the terms of the HMRC CDF, you essentially agree to co-operate and put things right.
It is important to remember that HMRC receives information from several different sources. HMRC will not tell you the information they hold or what suspicions they have. It is up to you as an individual to provide all the relevant information in a Contractual Disclosure Facility.
Please take into account that HMRC will not undertake a Code of Practice 9 (COP 9) investigation unless they have firm evidence that serious tax fraud has taken place.
Anyone reporting to HMRC about careless mistakes, errors or tax avoidance schemes are not usually subject to a Contractual Disclosure. These are only applicable where tax fraud has taken place.
When a Code of Practice 9 is issued, you have three options available to you:
- The Contractual Disclosure Facility route – Owning up to tax fraud
- The Denial route – Denying any wrongdoing
- The Non-Cooperation route – ignoring HMRC’s letter and offer
Please remember HMRC will promise that if the taxpayer suspected of tax fraud signs the document and owns up to the tax fraud, they will not pursue a Criminal Tax Investigation relating to that matter.
You must respond to any offers within the outline disclosure deadline issued as part of the Contractual Disclosure Facility. The HMRC will not extend the time under any circumstances.
When completing the Outline Disclosure, you should include the following details:
- What tax fraud took place?
- How was it committed?
- The involvement of any other people and entities.
- How you benefited from the fraud.
Remember to include this information for EACH separate tax fraud committed at any time.
If you do not believe you have been involved in any tax fraud, then you can sign the Contractual Disclosure Facility denial letter and return it to the HMRC. If the HMRC accepts your denial after verification, then they will issue a confirmation letter to you confirming that they no longer suspect you.
Please be warned, however, that if you make a denial and HMRC find that you have been involved in Tax Fraud, your case may be referred to their Criminal Investigation Team. The denial letter may be used as part of the evidence in any Court or Tribunal proceedings.
Tax Investigation Experts
If you find yourself in the situation of a COP 9 investigation, we recommend you speak to a Tax Investigation Expert immediately before signing the document.
Without getting professional, specialist advice beforehand, it could lead to severe repercussions at a later date. Getting help with a Contractual Disclosure Facility ensures everything is done correctly and helps prevent further problems down the line.
You mustn’t contact HMRC directly. Remember, anything you say, even on the telephone, will be recorded and may be used in evidence at a later date.
MS Taxes has a specialist team which has experience dealing with the more serious tax investigations. We will guide you and tell you exactly how HMRC will run its investigation. Our assistance with a Contractual Disclosure Facility/HMRC CDF will give you the information you need. If you are the subject of a COP 9 investigation, contact us today.