HMRC Tackles Tax Fraud

Tax investigations can be one of the most nerve-wracking experiences in life but help is now at hand from an unlikely source.

Her Majesty’s Revenue and Customs (HMRC) is giving an out to any taxpayers who are suspected of tax fraud. The new initiative will allow them to avoid criminal investigations, as long as they admit to their actions.

David Gauke, the Exchequer Secretary to the Treasury, explained: “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.”

The initiative is known as the new Contractual Disclosure Facility, and it will see the HMRC contacting a taxpayer to inform them that they are suspected of serious tax fraud.

HMRC Cracks Down on Tax Fraud

The tax payer is then offered the opportunity to enter a contract in which they are given 60 days to disclose the fraud under the guarantee that they will not be criminally investigated during that time.

Instead a civil investigation will take place to resolve the outstanding tax and interest payments, and financial penalties may apply. Failure to sign the contract, or breaking the contract once signed, will lead to a criminal investigation and potential prosecution. Taxpayers who are not under investigation but want to admit to fraud will not be able to apply the new ruling.

Speaking for The Chartered Institute of Taxation (CIOT), Gary Ashford welcomed the plans. He said: “This is a positive development. HMRC’s proposals would potentially provide greater clarity to those who have deliberately got their tax wrong and now want to engage with the taxman to regularise their affairs.”

However, we question whether there is anything new in this – it appears to be a further refinement of the ‘Hansard Procedure’ which, in various guises, has been in existence for decades but now being aimed at a wider cross-section of taxpayers.

Apart from the question as to whether HMRC has the resources to take on more criminal work, we also question how HMRC’s proposals will work in practice. This is because, in any other instances where criminal activity is suspected, the defendant at the very least is entitled broadly to know what they are accused of.

HMRC’s approach is akin to a person receiving a letter from the police telling them that they are suspected of criminal activity and, without providing any specifics, giving them 60 days in which to confess or run the risk of going to prison.

Unless carefully vetted, the system could be open to abuse. If you need advice on tax fraud issues, contact Forensic Accounting Services today.