Press Room

12 Jul 2022

Is Direct Taxpayer Access Always a Good Thing? – Andrew Park


Tax Investigations Partner, Andrew Park, examines HMRC’s guidance for individuals making voluntary disclosures of any omissions in their taxes, and explains the potential perils of this approach, in Accountancy Daily.

Andrew’s article was published in Accountancy Daily, 11 July 2022, and can be found here.

HMRC has gone to real efforts over recent years to improve and develop its internet interface with taxpayers and professional advisors – both to provide them with easy access to information and to enable easy and efficient performance of compliance responsibilities.  Over the last five years HMRC’s internet platform has included a Digital Disclosure Service portal for taxpayers to make voluntary disclosures to HMRC of past omissions – including offshore related matters under the Worldwide Disclosure Facility and omitted rental income under the Let Property Campaign.

However, is it possible to go too far in enabling taxpayers to do some things through the internet if that can result in them not seeking professional advice in areas where professional involvement should be regarded as a vital safeguard?

When HMRC published revised online guidance a couple of months ago to taxpayers on how to make voluntary disclosures it included a new section:

1.4 Contractual Disclosure Facility

The Contractual Disclosure Facility is specifically for when you have deliberate behaviour to disclose. You can ask to enter the facility if your deliberate behaviour has brought about a loss in any of the taxes, duties or payments administered by HMRC, including the taxes, duties and payments that are listed.

The Contractual Disclosure Facility is a contract that gives you the assurance that HMRC will not carry out a criminal investigation into the deliberate behaviour you disclose. You do not have to wait for HMRC to offer you the facility. You can ask for it by filling in the contractual disclosure form CDF1.

Under the terms of the Contractual Disclosure Facility, you will make a complete, open, accurate and honest disclosure of all deliberate behaviour and irregularities in your tax affairs and in return HMRC will not to carry out a criminal investigation into your disclosure. Providing a full disclosure is the only way to guarantee this.

HMRC does not have to offer you the facility contract and may not be able to do so if you’re already involved in a criminal investigation by HMRC, or another law enforcement agency (such as the police).

The Contractual Disclosure Facility is not suitable if you only have careless errors or mistakes to disclose.

More information on the Contractual Disclosure Facility can be found in HMRC’s Code of Practice 9.

In other words, the new voluntary disclosure guidance addressed to taxpayers provides a direct link to an HMRC page containing an electronic form whereby they can self-report themselves for tax fraud and request to make a civil disclosure – albeit in doing so HMRC reserves the option of instead embarking on a criminal investigation with a view to prosecution and possible imprisonment.  The likelihood that HMRC might chose instead to criminally investigate is, of course, remote.  However, even under the civil Code of Practice 9 Contractual Disclosure process, seeking to rectify past deliberate omissions is not something that should be done lightly without appropriate professional advice – not where HMRC can assess back up to 20 years, maximum penalties can be 100% (more still if offshore related) and mishandling could tip the disclosure over to a criminal prosecution.  Indeed, with the recent death of champion jockey Lester Piggott, many of us in the tax world are reminded of the sporting legend’s fateful brush with the taxman and how he came to be imprisoned for tax fraud.  This happened not because HMRC initially sought to prosecute him but because he failed to properly engage with a civil investigation of the fraud – something that was thrown into sharp focus with HMRC when he sought to pay his civil tax settlement with a cheque drawn from a still undisclosed bank account holding yet more untaxed earnings . . .

HMRC’s warnings to seek professional guidance are few and – I would argue – perfunctory.  There is no warning in the CDF section above and only two fleeting suggestions elsewhere in the voluntary disclosure guidance – once in a general section called “How to Calculate What You Owe” it says “you may want to seek professional advice” and once again it makes the suggestion in a section on “Your rights when seeking penalties”.  If one scrolls down the HMRC web page linked to the self-disclosure form, it states “You should get independent advice before you do this”.  However, surely since professional advice is truly required it would be more appropriate to remove the self-registration form altogether.

COP 9 CDF is a highly involved and often long-drawn-out process that unless properly conducted can seriously prejudice the taxpayer financially and even jeopardise their liberty if the taxpayer’s conduct during the process is found wanting.  It variously includes preparing an initial Outline Disclosure of all deliberate omissions, an interview with fraud investigators, the preparation of a detailed full disclosure to HMRC collating all the relevant information setting out the taxpayer’s position on the relevant technical treatments and mitigating factors, the preparation of documentation such as a Statement of Assets and often drawn-out negotiations with HMRC of the final tax and penalty liabilities.  None of it lends itself to competent navigation by an unrepresented taxpayer – so why make it easier for the taxpayer to potentially do something so unwise?  Surely, for its part, HMRC’s Fraud Investigation Service does not really want to engage in the COP 9 process with unrepresented taxpayers either.  I am not suggesting that HMRC is seeking to entrap taxpayers – merely that this facility to easily bypass independent professional advice and self-report oneself for tax crime does not appear properly thought through by HMRC’s web designers.


Andrew Park

Andrew is the Tax Investigations Partner at Andersen in the United Kingdom. He specialises in providing solutions to tax problems and resolving investigations and voluntary disclosures with HMRC.

Email: Andrew Park