WHAT IS THE CONTRACTUAL DISCLOSURE FACILITY?

Below we summarise the key information 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

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 writes 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 the Code of Practice 9
  • An acceptance letter
  • A denial letter
  • A disclosure form

It follows then that you have three options:

  • Owning up to fraud via this disclosure process
  • 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

THE CONTRACT

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.

You must:

  • Make 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 concerns regarding tax fraud then you should approach a tax investigation specialist and make a full voluntary disclosure without delay. If you have any questions regarding the Contractual Disclosures or procedures or have received a letter offering you a contract, you should seek advice from a tax investigation specialist without delay.

Further reading

Please do take some time to read our detailed tax investigation advice on HMRC’s Contractual Disclosure facility, Code of Practice 9 and the Fraud Investigation Services.