HMRC mulls new Contractual Disclosure Facility

HMRC’s summer consultation season continues with the publication of a discussion document setting out the terms for a proposed contractual disclosure facility (CDF).

When enacted, the CDF will join the wave of amnesty schemes under which taxpayers who have evaded tax can come forward to negotiate settlements without the threat of criminal action.

The discussion paper notes that HMRC now has access to better information, for example on offshore account holders. Improved data-matching technology makes it easier for the department to identify suspected fraud at an earlier stage, raising the need for more streamlined legal processes to tackle these cases quickly and effectively.

Under the CDF proposal, in such situations HMRC would write to the taxpayer informing them that they were suspected of tax fraud and offering an opportunity to enter into a contract to disclose that fraud in exchange for certainty that HMRC would pursue a criminal investigation.

A 60-day period is suggested to allow the taxpayer to prepare an outline disclosure of all known irregularities, covering what happened, the amounts involved and any entities or other parties involved. It would also require them to make an admission of fraud.

The proposal would also offer taxpayers the opportunity to make a spontaneous disclosure.
On 18 July, HMRC also updated its Code of Practice 9 (COP9) for criminal investigation of fraud processes. This incorporates slight changes in layout and emphasis surrounding situations where HMRC asks the taxpayer to prepare a disclosure report.

The closing date for the CDF consultation period is 20 September 2011.

Continued...