Contractual Disclosure Facility

CONTRACTUAL DISCLOSURE FACILITY

Below we explain the key information you need regarding the Contractual Disclosure Facility (CDF); let us begin by looking at the changes in HMRC’s approach towards the investigation of suspected tax fraud. A change that gave rise to to a different type under the terms of the CDF and Code of Practice 9 (COP 9).

We explain what to do if you receive a letter from HMRC under Code of Practice 9, the implications of an HMRC investigation of suspected tax fraud and your options should you HMRC offer you the opportunity to take part in the Contractual Disclosure Facility (CDF).

In effect if you receive CDF letter; covered by a notice under Code of Practice 9, HMRC suspect you of serious deliberate tax evasion. Your invitation to enter into a contract under the Contractual Disclosure Facility is an olive branch. Your opportunity to disclose all tax irregularities to HMRC in return for immunity from prosecution.

The Contractual Disclosure Facility replaces the old HMRC Civil Investigation of Fraud procedures. HMRC will write to you informing you that you are suspected of tax evasion.

Their letter; headed INVESTIGATION OF SUSPECTED TAX FRAUD, 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:

  1. Owning up to fraud via this disclosure process
  2. Deciding not to own up to fraud – referred to as the denial route
  3. 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
  • Include details of any non deliberate irregularities
  • 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.

CONTRACTUAL DISCLOSURE FACILITY FAQs

Now that we have given you some useful background on the Contractual Disclosure Facility; below we answer the most common questions we are aske

WHAT IS THE CONTRACTUAL DISCLOSURE FACILITY (CDF)?

The Contractual Disclosure Facility (CDF) is a disclosure opportunity; which enables you to admit to deliberate tax fraud and disclose all irregularities which arose from that deliberate activity to HMRC. The offer to take part in the Contractual Disclosure Facility comes with a guarantee of immunity from prosecution if a full disclosure of all tax evasion is made.

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.