‘Absolute candour’ demanded by HMRC to avoid UK tax fraud prosecution

The CDF allows tax fraud suspects to make full and complete disclosures of all deliberate and non-deliberate behaviours to HMRC officials with the understanding that they will not be criminally investigated for those disclosures. In exchange, however, suspects must pay their tax and fines.

Tax expert Steven Porter of Pinsent Masons said: “The CDF has always been an attractive option for those with deliberate tax irregularities to come clean to HMRC without facing criminal repercussions. HMRC no doubt has one eye on the fact that the CDF can appear to the law-abiding ‘person on the street’ to be too lenient on those who deliberately commit tax fraud.”

“In that light, these changes make it clear that HMRC expects absolute candour around not just the deliberate tax irregularity, but also a taxpayer’s other tax affairs if they are to benefit from the CDF and avoid criminal prosecution,” Porter added.
HMRC said the CDF was a “vital tool” against tax fraud which enabled officials to recoup millions of pounds for the taxpayer without having to resort to costly criminal prosecutions. It said that the changes to the terms of the CDF contract would help ensure that tax fraud suspects are clear on exactly what they are signing up to, HMRC’s expectations throughout the investigation, and the serious consequences of their non-compliance.

New sections have also been added to the CDF that reinforce the different circumstances in which case can escalate to a criminal investigation and ultimately to prosecution and clarify when the CDF can cover fraud related to HMRC functions that do not involve tax. Additions also set out what HMRC can do if a tax fraud suspect rescinds their admission of deliberate behaviour, after they have accepted a CDF offer.

Investigations specialist Andrew Sackey of Pinsent Masons said: “These changes reiterate that the CDF is an opportunity offered as an alternative to a criminal investigation. In essence, it makes clear that civil cooperation is the last chance recipients have – refusal to work with HMRC will heighten the risk of criminal enforcement.”

He added: “HMRC’s Fraud Investigation Service have announced a project to centralise all CDF ‘criminal underpin’ decisions and we can expect to see a more robust and consistent application of the deterrent principles as we move forward.”