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HMRC internal manual

Fraud Civil Investigation Manual

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HM Revenue & Customs
Updated
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Where CDF offer is made up to 29 June 2014: managing the detailed disclosure process: general

The preferred outcome of a COP9 investigation is to reach agreement on the right amount of tax due and gain a truthful explanation as to why it arose.

How the investigation will proceed is wholly dependent on the taxpayer’s response to the opening letter and the offer of a contract. If the offer of a contract has been accepted, unless the Outline Disclosure is sent at the same time, then the next stage is to wait until the Outline Disclosure is made.

When you get the Outline Disclosure you will need to review it and submit it (within five or ten working days of receipt] to the Authorising Officer (AO) with your recommendation on how the investigation should proceed. There are several options available to you at this stage.

In some cases your recommendation will be that the Outline Disclosure indicates that the fraud is straightforward and the amount lost is easy to establish. In that type of situation you might conclude that a meeting (with the taxpayer and/or adviser) is not necessary. In which case you can move swiftly to agreeing what is owed, obtaining the necessary certificates (Statement of assets and liabilities, Certificates of bank and credit cards operated and Certificate of Full Disclosure), arranging for payment and settling your investigation.

In other cases you might want to speak to the agent before you can decide how you should proceed. The agent might be able to address any concerns that you have and a meeting might not be necessary. You can then move swiftly to conclude the investigation.

In some cases it will be apparent from the Outline Disclosure that a meeting will be needed so that you can address any concerns in more detail. In more complex situations, or where the Outline Disclosure is not that detailed, you will almost invariably want to meet with the taxpayer and their appointed adviser. However, it does not automatically follow that the taxpayer will need to attend and you should address this in your recommendation to the AO.

There will be cases where it is clear from the Outline Disclosure that a more detailed report is required to address your concerns. Where you consider that a more detailed report is necessary the taxpayer should be asked to attend any meeting.

The taxpayer should also be asked to attend when the Outline Disclosure does not include the fraud that you suspect and Criminal Investigation has confirmed that a civil investigation is appropriate.

The taxpayer is the person best placed to answer any questions that you have and their attendance is essential, as you will need to make sure that they understand why you are asking them to provide a detailed report. The cost of the preparing the detailed Disclosure Report falls upon the taxpayer and it is not tax deductible in respect of direct taxes. However, in terms of indirect taxes, any VAT charged on fees in relation to business tax elements of an investigation is reclaimable through the VAT registration. VAT charged on fees in relation to personal taxes is not reclaimable through the VAT registration. You will need to make sure that you make this clear to the taxpayer and that this is recorded in the notes.

The taxpayer should be asked to specifically confirm during any meeting that this is understood and that they are prepared to commission such a report.

The cost of preparing a disclosure report can be considerable and care should be taken to ensure that HMRC does not contribute to unnecessary work. It is important that we do not mislead the taxpayer.