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HMRC internal manual

Fraud Civil Investigation Manual

Where CDF offer is made up to 29 June 2014: managing the detailed disclosure process: nature of the detailed disclosure report

Even where an experienced adviser is present it is often helpful for the smooth progress of the case to outline what HMRC expects to see in the detailed disclosure report (see FCIM106060). This will usually be done immediately after the meeting with the taxpayer. The taxpayer should be encouraged to attend, as this will give them a much better understanding of what is required and why. It will also get them more involved in the process.

You should make sure you explain:

  • There is no set format for a disclosure report.
  • Generally, the content, format and structure of the report will be dictated by the nature and demands of each case.
  • There is no reason why a single report should not be prepared where indirect taxes and direct taxes are at risk.
  • HMRC does not tell taxpayers what to disclose. That is entirely a matter for the taxpayer. However, they should make sure that all your concerns are being addressed. If this is not the case then a report will not be the right solution and you will take over the investigation, as there is no point in waiting for a report that you know will be inadequate.
  • HMRC does not ‘agree’ a period for the disclosure report to cover. The period to be addressed in the disclosure report is the period (theoretically without limit of time - in practice up to 20 years) in which fraud has occurred. This should have been disclosed in the Outline Disclosure.
  • For direct taxes, often the initial period which is looked at may be altered as the investigation proceeds. Usually the conclusion of the investigation period is the date of the last accounts sent to HMRC. Later periods in which frauds occurred may be dealt with by drawing up true accounts from the start, though the whole matter may be agreed comprehensively by HMRC.
  • For indirect taxes such as VAT, if the fraud continued post challenge, there is nothing to stop irregularities in these subsequent returns being captured in the Disclosure Report.
  • It is for the professional adviser working with the taxpayer to undertake such investigation as is needed so that all matters can be disclosed.
  • The professional adviser will decide the detail of how matters are to be presented in the report, but facts always remain the responsibility of the taxpayer.
  • Certain matters should be present in all reports. There ought to be a narrative explanation of what has gone wrong, a quantification year by year of true income and gains for all periods for which there has been an under-declaration, and a certificate signed by the taxpayer adopting the report as their full disclosure (see FCIM120080). Invariably a Statement of Assets at an agreed date (standard form MS142) and Certificates of Bank etc. accounts operated (see FCIM120070) and Certificates of credit/debit cards operated (see FCIM120060) will be required from taxpayers who have participated in, or benefited from, the frauds disclosed by the report. These last three comprise part of the “formal disclosure” which is required in all cases.
  • It is not HMRC’s wish to see unnecessary work undertaken and costs incurred in the preparation of the disclosure report. It is the adviser’s responsibility to make sure that costs are kept to the minimum, consistent with the requirements of a full disclosure.
  • HMRC will meet the advisers during the time when the disclosure report is being prepared. How frequently will be for the investigator to decide. The Investigator needs to be satisfied that the report is proceeding properly.
  • When they make progress visits, Investigators can give further limited general advice about what areas are, or are not, being considered for inclusion in the report. They must be mindful that when giving any further advice, that it is in no one’s interest for a report to include plainly unnecessary work, and which may result in the submission of the report being delayed.