HMRC Contractual Disclosure Facility

Behaviour that goes beyond a mere accidental error and includes prosecutable offences such as:

• cheating the public revenue
• fraudulent evasion of tax or
• fraud.

Direct evidence of such behaviour can include:

• evidence from a third party
• an admission by the person
• observations by HMRC officers.

Where there is no direct evidence, HMRC will be required have to produce indirect evidence based upon reasonable inferences drawn from the available facts.

Examples of such behaviour include:

• financial gain from ‘off record sales’ used for personal benefit,
• deliberately excluding one or more transactions of a series of similar transactions,
• multiple inaccuracies that suggest the behaviour goes beyond careless,
• a significant inaccuracy that is extremely unlikely to have gone unnoticed.

It should never be the case that a taxpayer accidentally engages in ‘deliberate and dishonest misconduct.’

Following receipt of a CDF, the recipient has sixty days to comply with two disclosure stages, commencing with a valid ‘Outline Disclosure’ of the deliberate conduct resulting in a tax loss.

This Outline Disclosure is followed by a ‘Certified Statement’ which confirms that a full, complete and accurate disclosure of all other irregularities has been provided. This includes certified statements of assets, liabilities, all bank statements and credit cards, collectively known as ‘Formal Disclosure.’

The deadline can only be extended in exceptional circumstances.

Communications should be sent to HMRC by email, who will respond within seven days. HMRC will contact you during the sixty-day period unless you have responded to the CDF.

During the sixty-day period, HMRC is still entitled to:

• take action against goods you own or possess,
• start or continue debt collection,
• continue any other action needed as part of HMRC’s legal obligations.

HMRC may require the recipient to attend an Interview.

A CDF can be refused by completing and returning the ‘CDF Rejection letter,’ which will have been supplied, or by ignoring HMRC’s correspondence.

Although withdrawal from the process, after acceptance of the CDF offer, will amount to a rejection, such action is likely to trigger the warning contained within HMRC Guidance:

‘HMRC may begin a criminal investigation into your tax affairs at any time. The letter you have signed can be used in court as evidence to show that you intended to deliberately mislead HMRC.’

Cooperation within a COP 9 constitutes an admission to deliberate and dishonest behaviour.
HMRC itself advises that before accepting or rejecting a COP 9 offer, legal advice/assistance should be sought.

The standard position is that those who accept a CDF and make honest and complete admissions during the CDF process will not be criminally prosecuted by HMRC in respect of the disclosure made.

Should HMRC still seek to pursue a criminal prosecution it is likely that such a prosecution will be prevented by the courts as an abuse of process (R v Abu Hamza).

In accepting a CDF, you agree to:

• admit that your deliberate behaviour has brought about a loss of tax, duty or payment administered HMRC,
• tell HMRC about all the tax, duty and payment losses brought about by your deliberate behaviour,
• provide as much detail as you can within sixty days, as stated above,
• give additional details, in the form of an Outline Disclosure, referred to above,
• provide full cooperation,
• pay any tax, duty, interest and penalties that you owe.

However, should any failure to disclose all evidence, even if believed to HMRCs investigation, is discovered HMRC may still prosecute. The same will apply if any false statements are made and/or submitted.

It should also be noted that CDF relates only to investigations issued and conducted by HMRC. Acceptance of a CDF may only prevent criminal prosecutions being instigated by HMRC and does not alleviate criminal liable and the potential of criminal prosecution from any other law enforcement agency.