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HMRC internal manual

Technical Teams Operational Guidance

Investigation work: Code of practice 9: examining the disclosure report: earliest year of Disclosure Report

In some cases the taxpayer may indicate exactly when an offence giving rise to additional tax commenced. It may be possible in such a case to be confident after investigation that we have identified when matters started to go wrong.

In other cases (particularly those where the offence is ill-defined suppression and retention of cash sales) we will need to look very closely at the earliest reported disclosure year in order to see whether or not the fraud started earlier.

Where Capital Statements have been drawn up the presence of a deficiency in the earliest year or an unaccountably large figure of starting private capital, may indicate the need for examining earlier years.

Often practical issues come into play. The adviser may have started at a particular point because earlier documentation was not available.

If it can be demonstrated, by reference to evidence, that a taxpayer has consciously chosen to omit from the Disclosure Report some significant fraud that occurred in earlier years, then the case is one of incomplete disclosure and must be referred to Criminal Investigation (see Enforcement Handbook).

If matters are never going to get that far, then the Investigator may well have to simply negotiate with the adviser to scale known profit additions back into the period for which it now appears they extend.