Civil Investigation of Fraud (Code 9): historical record: pre-authorisation review and action: deceased persons
As deceased persons are unable to defend themselves against the imposition of a penalty it is impossible to comply with Article 6 Human Rights Act if a penalty is imposed, in cases where evidence of a possible fraud comes to light after the death of a taxpayer. Civil evasion penalties must not be imposed in these circumstances and therefore an investigation under the terms of the CIF procedure is not appropriate. An alternative method of investigation should be considered to establish and assess any tax arrears and interest.
The position regarding partnerships or companies, where one partner/director dies but others remain may be less clear-cut, particularly if it appears the fraudulent/dishonest conduct was wholly attributable to the deceased and they controlled the accounting records and tax returns. You are advised to seek policy/legal advice in such situations.
In cases where a taxpayer dies after having made a disclosure of irregularities under the CIF procedure, it may be possible for us to continue with our action and to impose a civil evasion penalty as appropriate. However, we would need to be satisfied that there was a realistic possibility of (a) securing payment of the tax and penalty and (b) of succeeding should the matter be referred to a Tribunal. In view of the fact that there may be inherent complications and possible challenges in such a situation, advice should again be sought at the earliest opportunity in all cases.