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HMRC internal manual

Fraud Civil Investigation Manual

Where CDF offer is made 30 June 2014 onwards: 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 customer’s response to the opening letter and the offer of a contract. If the offer of a contract has been accepted and, 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 as soon as possible and submit it 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 and the customer’s behaviours are easy to establish. In that type of situation you might conclude that a meeting with the customer, or their adviser, is not necessary. If that is the case you can move swiftly to agreeing what is owed, obtain the necessary certificates:

  • Statement of assets and liabilities,
  • Certificate of bank accounts operated,
  • Certificate of debit and credit cards operated,
  • Certificate of Full Disclosure, and

arrange for payment to be made and so that you may conclude 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 probably want to meet with the customer and their appointed adviser. However, it does not automatically follow that the customer will need to attend and you should address this in your recommendation to the Authorising Officer.

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 customer must be asked to attend any meeting.

The customer 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 preparing the detailed Disclosure Report falls upon the customer and is not tax deductible in respect of direct taxes. However, for 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 customer and that this is recorded in the notes.

During your meeting you must ask the customer to

  • confirm their understanding of the above point, and
  • indicate 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 customer.