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An Update on Serious Tax Investigations

HMRC have a variety of tools at their disposal for conducting compliance activity. Code of Practice 8 (COP8) and Code of Practice 9 (COP9) are used where HMRC suspects tax fraud, and whilst tax fraud is a criminal offence, HMRC will often settle matters using the civil procedures available to do so.

The Contractual Disclosure Facility (CDF) allows individuals to correct their tax affairs with the guarantee that HMRC will not prosecute them criminally providing that a full disclosure of the suspected fraud is made.

What to be mindful of?

There are a number of potential pitfalls involved with this type of investigation such as refusing the offer of the CDF or not making a full disclosure as part of the process which can lead to higher penalties. This can also result in the publication of your client’s details or, in the worst-case scenario, prosecution and a criminal record.

The prospect of the latter occurring should not be taken lightly, as the recent sentence handed to James Burton in August 2023 due to his involvement with a £492,000 VAT fraud demonstrates.

Mr Burton was offered the opportunity to make a full, open and honest disclosure to HMRC through the CDF, but instead chose to ignore HMRC and not engage with the process. He was subsequently found guilty of three counts of fraudulent evasion of income tax, one count of cheating the public revenue, and one count of fraudulent evasion of VAT.

It is therefore important to consider using specialists in this area of compliance work who have the relevant experience in making the necessary disclosures to HMRC, which is invaluable in resolving these potentially difficult and stressful tax investigations. In fact, HMRC’s own CDF guidance encourages the engagement of specialists in this area.

Have there been any recent changes?

From 14 June 2023, HMRC have amended the contractual requirements of the CDF to include two further obligations. Firstly, the client must fully cooperate with HMRC, which includes personally attending meetings that HMRC may request, as well as retaining relevant records and documentation. The second, is that the client must repay any liabilities owed within a defined period.

When should a voluntary disclosure be made?

In some circumstances, it is important to consider whether a voluntary disclosure should be made to HMRC. There is no need to wait for a letter coming through the door suggesting that tax fraud has been committed when this is already known. There is the option to take advantage of the terms of the CDF voluntarily and this should be given serious consideration as it will result in lower penalties than would be achieved by waiting for HMRC to make the first move. This relates to all taxes that HMRC have a duty to administer.

How can Markel Tax help?

The Markel Tax Investigations team has many years’ experience of dealing with all types of compliance interventions.

Where these issues relate to tax fraud, we can assist with the disclosure process ensuring the outline disclosure is complete and submitted on time, providing the necessary support and assistance for any meetings with HMRC and preparing the detailed disclosure report.

For more information about the CDF, or any other queries relating to resolving HMRC enquiries,