Contractual disclosure facility

By Tolley in association with Guy Smith of inTAX Ltd
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The following Personal Tax guidance note by Tolley in association with Guy Smith of inTAX Ltd provides comprehensive and up to date tax information covering:

  • Contractual disclosure facility
  • Introduction
  • The scope of the CDF and COP 9
  • What is the CDF?
  • How does HMRC make contact?
  • What does the letter say?
  • CDF route
  • Non-cooperation route
  • What happens after the CDF route has been adopted?
  • The disclosure report
  • What happens after the non cooperation route has been adopted?
  • Unusual circumstances
  • CDF letters issued prior to 30 June 2014

Introduction

The vast majority of HMRC enquiries, or ‘checks’ as they are now more commonly called, are carried out by staff in the network of tax offices across the UK. A formal notice is issued and the individual, sole trader, partnership or limited company is told which tax return is to be the subject of a check. Typically, the HMRC Officer requests information to conduct the check, in order to confirm the accuracy and completeness of the tax return in question.

However, HMRC also has specialist teams conducting civil and criminal investigations, where it suspects serious tax fraud, involving direct and / or indirect taxes, has taken place. HMRC considers a tax fraud to involve an element of deliberate behaviour where, for example, there has been a failure to declare a tax liability, a concealment or withholding of information or a misrepresentation of facts.

On 31 January 2012, HMRC introduced a new regime for handling serious fraud cases called the contractual disclosure facility (CDF). At the same time a revised Code of Practice 9 (COP 9) was published, setting out the rules and conditions of the new CDF policy. COP 9 governs how HMRC investigates suspected fraud.

The primary change HMRC made was to withdraw the guarantee not to prosecute. That is, unless the person involved enters and fully complies with the terms on offer as part of the CDF.

Note that the CDF was changed with effect from 30 June 2014 to remove the 'denial' option in response to the initial letter from the HMRC. This leaves the taxpayer with two options:

  • go down the CDF route, ie admit to the fraud and make a full disclosure to HMRC, or
  • decide not to cooperate with HMRC and has no

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