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HMRC's contractual disclosure facility came into force on 1
February 2012. This new tax investigation arrangement (replacing
Code of Practice 9) will have a big impact on those who come under
the investigation regime.
The important changes are as follows.
HMRC will issue a formal invitation to persons to enter into
the contractual disclosure facility (CDF) and make full
disclosure.
The department will allow a 60-day period so that a detailed
outline of the disclosure can be made.
An initial formal opening meeting will no longer always take
place.
Unlike the previous regime, criminal proceedings may now be
used by HMRC even though the CDF has been offered.
What underpins the new CDF is the fact that at the outset, in
addition to making the initial disclosure, the individual under
investigation will be required to sign a letter agreeing to
co-operate with the investigation. This forms a binding
contract.
The most significant change is that even though HMRC has offered
a civil investigation there are now more opportunities for HMRC to
refer cases for criminal investigation if the individual fails to
make a valid disclosure, or denies any irregularity or if a
disclosure is incomplete.
The initial letter from HMRC is possibly the most important part
of the investigation as a full disclosure of all irregularities
made within the time limit should avoid criminal proceedings and
help to secure minimum penalty levies. If such letters are not
dealt with quickly and efficiently, HMRC may implement criminal
proceedings, which can result in imprisonment or, at best, a drawn
out, intrusive and expensive investigation.
For the first time HMRC recommends that the individual under
investigation obtains advice from a specialist in this area. It is
vital that anyone subject to such a regime takes professional
advice as failure to do so can now result in prosecution and
potential imprisonment. There are also serious ramifications for
advisers if they are found to be at fault as part of the
investigation.
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.
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