From today, HMRC’s Code of Practice 9 will operate under a contractual framework called the Contractual Disclosure Facility. The CDF sets outs the rights and obligations of the taxpayer and HMRC respectively.
Signed by both parties, the new contract is aimed at getting the party being investigated to agree to make a full disclosure and to continue to cooperate during the disclosure process. If the accused breaks the contract, HMRC has been given the right to begin criminal proceedings if appropriate. The introduction of the contract also means, if the party being investigated cooperates fully, they can ensure they avoid criminal proceedings.
According to international law firm Withers, the CDF regime particularly welcomes those who make a voluntary disclosure as such individuals can expect greatly reduced penalties, although the firm added a full review of each individuals taxpayers’ circumstances should be undertaken before any decision is made.
Withers also said these changes are likely to be of particular relevance to UK taxpayers with bank accounts or other assets in Switzerland, many of which are entirely innocent of wrongdoing, but others may have matters to disclose.
In a statement the law firm said: “The Overseas Co-ordination Unit is actively assessing large volumes of data compiled by HMRC from different sources and is believed to be a major beneficiary of the £800m set aside by the UK Government to pursue tax compliance.”
A summary of the major changes:
- A contract in writing between HMRC and the taxpayer, under which the taxpayer agrees to make full disclosure and provide continuing co-operation while matters are resolved.
- A written undertaking by HMRC not to pursue a criminal investigation in exchange for full disclosure of all tax frauds and continuing co-operation during the disclosure process.
- HMRC will no longer give an unlimited assurance of no criminal investigation for past wrongdoing if full disclosure and co-operation is not forthcoming.
- A 60 day time limit within which to accept (or reject or ignore) HMRC’s offer of a contract and, if accepted, to provide outline disclosure.
- A meeting with the taxpayer, his or her professional adviser and HMRC at which it can be decided whether additional “formal disclosure” is required.
- The risk of investigation for a separate criminal offence if materially false or misleading statements are made, or materially false documents are provided, during the CoP9 investigation.
- For the first time, HMRC will inform taxpayers that “many people find it helpful to appoint a specialist adviser who is familiar with this code, in addition to their regular adviser”.