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Markel Tax

23 Apr 2021

A topical overview of serious tax investigations

John Lewis has recently joined the investigations team at Markel Tax after nine years with HMRC in a variety of specialist roles. Most recently he worked within HMRC’s Fraud Investigation Service, handling Code of Practice 8 and Code of Practice 9 investigations, and has significant experience of the “Contractual Disclosure Facility” (CDF). In this article, he looks at HMRC’s work in this area. 

What is HMRC’s approach in these cases?  

HMRC have a variety of tools at its disposal for conducting compliance activity. Code of Practice 8 (“COP8”) and Code of Practice 9 (“COP9”) are used where HMRC suspects tax fraud, and whilst tax fraud is a criminal offence, HMRC will often settle matters using the civil procedures available to do so.
The CDF allows individuals to correct their tax affairs with the guarantee that HMRC will not prosecute them criminally providing that a full disclosure of the suspected fraud is made.

What you should be mindful of

There is a number of potential pitfalls involved with this type of investigation such as refusing the offer of the CDF or not making a full disclosure during the process which can lead to higher penalties.  This can also result in the publication of your client’s details or in the worst-case scenario, prosecution and a criminal record.

It is therefore important to consider using specialists in this area of compliance activity who have the relevant experience in making the necessary disclosures to HMRC needed to resolve these potentially difficult and stressful tax investigations. 

When should a voluntary disclosure be made?  

In some circumstances, it is important to consider whether a voluntary disclosure is required.  There is no need to wait for a letter coming through the door suggesting that suspected tax fraud has been committed when this is already known.  There is the option to take advantage of the terms of the CDF voluntarily, resulting a better outcome than would be achieved by waiting for HMRC to make the first move. 

This relates to all taxes that HMRC has the administrative responsibility for.  However, in the current climate, there is no question that there will be a focus on fraud related to the various Government Support Schemes, such as the Coronavirus Job Retention Scheme (CJRS), Self-Employment Income Support Scheme (SEISS) and the Eat Out to Help Out (EOTHO) Scheme.

HMRC have received over 25,000 reports of fraud associated with these schemes since they began and have already issued over 35,000 targeted letters where it has reason to believe that claims are incorrect. HMRC have also begun 6,500 investigations into these claims, most of which will be treated as civil investigations, but some will inevitably be treated as criminal.

Whilst HMRC’s criminal investigations are reserved for the most serious instances of tax fraud, those suspected of making fraudulent claims at a time when we are all being encouraged to pull together through the current pandemic, will certainly be high on HMRC’s compliance agenda.

HMRC have already made a number of arrests in this respect and it is predicted that these types of investigation will only increase. 

How can claimants limit the damage?

Claimants who have deliberately over-claimed amounts they were not entitled to can take advantage of the CDF. There are a number of benefits to this, as outlined above, particularly if they sign up to the CDF voluntarily.

In exchange for admitting deliberate conduct and telling HMRC about the tax losses that have arisen, HMRC will guarantee not to carry out a criminal investigation. Full cooperation with the process will also lead to significantly reduced penalty levels and avoid having their details published by HMRC.

Apart from the obvious financial incentive, resolving matters confidentially and efficiently with HMRC at a time when those taking advantage of these schemes are being put into sharp focus by the Government and the wider public alike, is clearly very beneficial.

What help is available?

The Markel Tax Investigations team has many years’ experience of dealing with all types of compliance interventions and has taken the lead on CJRS & SEISS compliance activity, we can therefore assist with any enquiries into these matters.

Where these issues relate to deliberately over-claimed grants, we can assist with the whole process ensuring the outline disclosure is complete and submitted on time, providing the necessary support and assistance for any meetings with HMRC and preparing the detailed disclosure report.

For more information about the CDF, or any other queries relating to resolving these types of HMRC enquiries, contact John Lewis or call us on 0333 305 3667.

Tagged Tax Investigations Tax Investigations
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