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HMRC’s Civil Investigation Powers are more aggressive

HMRC’s Civil Investigation Powers have changed and are more aggressive. 

HMRC has the power to investigate cases of suspected fraud in a number of ways, one of which is the power to enter into a Contractual Disclosure Facility (CDF) with suspected tax evaders to encourage the early settlement of tax evasion cases. There have just been some important changes in this area as HMRC continue to become more aggressive in its work.

The Contractual Disclosure Facility – What is it?

CDF has been used by HMRC for some time to enable a quick resolution to suspected fraud. It has traditionally involved HMRC confronting suspected tax evaders with their suspicion and inviting them to make a full and frank disclosure of their tax affairs whilst paying any sums owed. The deal normally involves payment of a penalty (as a proportion of the outstanding tax) and an agreement by HMRC that they will not bring criminal proceedings.  The procedure that governs this facility is known as COP9 (Code of Practice 9) – and there have just been some important changes to this procedure.

Changes to COP9 – The option of denying wrongdoing but agreeing to co-operate with HMRC has been removed

Until recently it had been possible for a taxpayer, when confronted with allegations of tax evasion by HMRC and the possibility of it being dealt with by the Contractual Disclosure Facility, to deny any wrongdoing but agree to co-operate with HMRC as they set about making a full investigation. This arrangement was generally considered to be fair to those tax payers who genuinely did not know (prior to investigation) whether there had been an underpayment of tax and were sure that any such underpayment was not brought about by deliberate conduct.

HMRC have, without any significant consultation, now removed this option, instead requiring an admission of “deliberate behaviour” before tax payers can take advantage of the Contractual Disclosure Facility (and avoid any risk of criminal proceedings).

Black and White: the newly found aggressiveness of HMRC. NDP can help

This black and white approach by HMRC is a sign of their newly found aggressiveness. We believe it is a very simplistic approach to the way the world actually works. To demand an answer to the question “Did you deliberately do it – yes or no?” with a “no” response putting the tax payer at risk of criminal investigation is a significant change.

If you or your company are experiencing problems in this area, our civil and regulatory lawyers can guide you through the whole CDF and COP9 process to achieve the best result possible. The sooner you contact us for an initial free consultation, the more we can do to help.

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