Contractual disclosure facility

Produced by Tolley in association with Guy Smith of inTAX Ltd
Contractual disclosure facility

The following Owner-Managed Businesses guidance note Produced 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 COP9
  • What exactly 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
  • More...

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.

HMRC’s regime for handling serious fraud cases is called the Contractual Disclosure Facility (CDF). Code of Practice 9 (COP9) governs how HMRC investigates suspected fraud and sets out the rules and conditions of the CDF policy. Under CDF, HMRC only guarantees not to prosecute where the person involved enters and fully complies with the terms on offer as part of the CDF.

Under CDF, the taxpayer has the following two options:

  1. to accept the CDF regime, ie admit to the fraud and make a full disclosure to HMRC, or

  2. not to cooperate with HMRC, in which case he has no protection against a criminal investigation

The scope of the CDF and COP9

The policy applies to all of the taxes collected by HMRC.

Direct taxes:

  1. income tax

  2. corporation tax

  3. national insurance contributions

  4. capital gains tax

  5. inheritance tax

Indirect taxes:

  1. value added tax

  2. customs duties (COP9 is not appropriate for Customs / International Trade Civil Investigations into non-commercial fraud, carried out at ports and airports)

  3. excise duties (alcohol, tobacco and oils)

  4. environmental taxes (climate change levy, aggregates levy, landfill tax and air passenger duty) insurance premium tax

  5. petroleum revenue

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