Contractual Disclosure Facility and Code of Practice 9
Deliberate and fraudulent underpayments of tax can be investigated criminally. Alternatively, the CDF/COP9 gives the opportunity to secure protection from prosecution.
The Contractual Disclosure Facility is complex, but highly beneficial for those potentially facing prosecution.
Co-operation with the process will help wrap things up faster without a criminal conviction.
You must prioritise seeking expert advice if you receive an invitation to use the CDF, either to ensure you meet the initial 60-day deadline to make a valid outline disclosure, or to discuss denial of any wrong-doing and rejection of the CDF.
HMRC can examine up to 20 tax years and requires acknowledgment that tax has been lost due to deliberate behaviour.
In cases where the offer is rejected or where no response is received, HMRC will undertake its own investigation and may build a criminal case with a view to prosecuting you.
If you co-operate fully
- HMRC will leave you to work with your advisor on the tax disclosure report.
- Monetary penalties will be lower and ‘naming and shaming’ can be avoided.
- HMRC will look to conclude the investigation without delay. You will be asked to offer a monetary sum to cover the tax, interest and penalties to settle all historic matters.
If you do not co-operate fully
- HMRC will mount their own investigation and might decide to prosecute you.
- Information and documents about your financial and business affairs might be requested from third parties (e.g. banks), which could damage to your reputation.
- Penalties are higher.
- There is also a risk of you being publicly 'named and shamed'.
- HMRC will leave you to work with your advisor on the tax disclosure report.
- Monetary penalties will be lower and ‘naming and shaming’ can be avoided.
- HMRC will look to conclude the investigation without delay. You will be asked to offer a monetary sum to cover the tax, interest and penalties to settle all historic matters.
- HMRC will mount their own investigation and might decide to prosecute you.
- Information and documents about your financial and business affairs might be requested from third parties (e.g. banks), which could damage to your reputation.
- Penalties are higher.
- There is also a risk of you being publicly 'named and shamed'.
Under the CDF, you will be asked to make a full disclosure of all deliberate (and non-deliberate) errors in your tax affairs. Provided your disclosure is accurate and complete, HMRC will not seek to prosecute you, and a civil monetary settlement will ensue.
Accusations of tax fraud should not be taken lightly. Using a specialist is imperative to ensure that immunity from prosecution is maintained; there are many pitfalls along the disclosure path.
It is also possible to make a voluntary request to participate in the CDF to secure immunity from prosecution, if protection is needed.
| If you believe that a loss of tax has not been brought about deliberately, you should not accept the offer of the CDF (or Code of Practice 9) as a matter of convenience. In these circumstances, you should reject the offer. HMRC will then start its own investigation, reserving the right to pursue a criminal investigation. Although the 'co-operative denial' route is no longer available, we can help you frame your response in such a way that will encourage HMRC to work with us to resolve any perceived issues. |
How we can help
The tone of correspondence can be intimidating and dealing with HMRC can be very stressful. However, you will avoid being prosecuted for tax fraud if you meet your obligations under the CDF and make a full and frank disclosure.
Crowe’s experienced and award-winning Tax Resolutions team can help you navigate the CDF process and ensure you meet your obligations.
We frequently work with other accountants and solicitors to help their clients who are invited to use the CDF and can work alongside existing advisors in a consultancy capacity.
Book a free consultation