HMRC offers “stay out of jail” disclosure facility for tax fraudsters

Tax fraudsters are being given the opportunity to own up to their misdemeanours without facing criminal proceedings.

Coming into affect at the end of the month, the contractual disclosure facility (CDF) will see HM Revenue and Customs write to taxpayers they suspect have committed tax fraud.

HMRC will offer individuals a CDF contract and three options – own up, rebuff the allegation, or do not reply in the form of an acceptance letter, a denial letter, a disclosure form and a copy of Code of Practice 9 – the Revenue’s guidance on tax investigations.

The tax authority will not enter into a criminal investigation if individuals enter into a CDF contract.

In return, the taxpayer in question will be forced to:

• Reveal details of all tax deliberately evaded, with no exceptions, within 60 days of being offered the contract;
• Sign a statement to say they have provided accurate and complete details of the fraud;
• Pay all taxes, duties, interest and penalties due; and
• Stop all fraudulent behaviour immediately.

This formal disclosure process will be the only way by which a taxpayer can admit to fraud without HMRC launching an official criminal investigation.

Those who take advantage of the disclosure facility will also likely to be on the receiving end of lower penalties.

Any individual who have been contacted by HMRC will have 60 days to disclosure any fraud, during which period they will not be contacted by the department – however as part of HMRC’s legal obligations, tax officials will still be able to take action against goods the taxpayer owns, start or continue debt collection or any other action needed.

Individuals not under investigation, but who may want to admit tax fraud, can contact HMRC requesting consideration for a CDF contract.

However in these circumstances, HMRC retains discretion to decide which cases are dealt with as civil cases, and which will be investigated as part of criminal proceedings.