HMRC brought the contractual disclosure facility into force on 1 February 2012. This disclosure facility involves cases of suspected tax fraud. Here are ten important facts you need to know about the CDF.
- The CDF is not appropriate for people who want to disclose only careless errors, mistakes, or avoidance arrangements.
- If you take up HMRC's invitation for the CDF process, HMRC agrees that it will not pursue a criminal investigation into the tax frauds disclosed.
- There are two stages to the agreed undertaking.
- An outline disclosure – to be made within 60 days of HMRC's invitation to explain what was done, how it was done and who was involved in assisting the tax fraud.
- A formal disclosure – this includes a certified statement
that a full, complete and accurate disclosure of all tax
irregularities has been made together with a certified statement of
assets and liabilities, and of all bank accounts and credit cards
operated. An incomplete disclosure could lead to a criminal
investigation.
- HMRC can recover unpaid tax, interest and penalties for up to the previous 20 years.
- Full cooperation will ensure the penalties charged are closer to the minimum level.
- The initial letter from HMRC should be treated very seriously and with the utmost priority as this is the most important part of the investigation.
- If a denial of irregularities is made or no cooperation is given when the CDF is offered, HMRC can then undertake a criminal investigation despite its original offer of a civil approach.
- If the CDF is accepted but no outline disclosure is made, HMRC may begin a criminal investigation.
- The time allowed for preparing a full disclosure report will depend on the complexity of the issues and will need to be agreed with the tax officer dealing with the case. There will not be a formal opening meeting in every case – this will be considered on a case by case basis.
- HMRC recommends that individuals under investigation obtain advice from a specialist in this area.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
