HMRC launches contractual disclosure facility

Under a new arrangement by HM Revenue and Customs, taxpayers who are not under investigation but want to admit to tax fraud can come clean in exchange for not being criminally investigated.

Under the contractual disclosure facility (CDF) a taxpayer will be given 60 days to decide whether to sign a “contract” with the HMRC agreeing to co-operate in putting things right. If the offer of the contract is accepted, and full disclosure made of all tax irregularities, no criminal investigation will be undertaken.

However, if the CDF opportunity is declined or ignored, HMRC will consider starting an investigation along criminal lines, potentially leading to prosecution.  Under previous arrangements, taxpayers who faced a civil investigation could be fined up to 200% of the tax due, but with the Revenue’s new emphasis on seeking criminal prosecutions, non-disclosure could lead to an unlimited prison sentence in addition to the fine.

Treasury exchequer secretary David Gauke said: “This new facility is a valuable tool which will help HMRC in its fight against fraud.  HMRC will set out clearly what is expected of taxpayers, and what will happen to fraudsters who choose not to disclose their crimes.”

HMRC was set a target of increasing criminal prosecutions for tax evasion fivefold at the Spending Review in October 2011 and is therefore under great pressure to prosecute more taxpayers for tax evasion.  Figures obtained by commercial law firm McGrigors from HMRC show that criminal convictions for tax evasion have jumped by 38% already in the past year to 148.

Phil Berwick, director at McGrigors, said: “This new procedure represents a significant change in the way HMRC conducts investigations where fraud is suspected. The change will help facilitate a very substantial increase in criminal prosecutions in the next few years.

“Taxpayers will be at greater risk of imprisonment and losing the family home.  For the more determined tax evaders, the chances of getting off with a fine and a slap on the wrist are diminishing.”

Accountants are warning any taxpayers with undisclosed liabilities to come forward voluntarily and seek professional guidance regarding their unpaid duties.

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