Contractual Disclosure Facility CDF

• COP9 is a special kind of investigation used by HMRC when they believe someone has committed serious tax fraud.
• CDF is an agreement or “contract” between you (the taxpayer) and HMRC. By signing it, you agree to reveal everything about your tax offences within a set period. In return, HMRC agrees not to press criminal charges for those offences.

Think of it like a second chance to fix any tax wrongdoings. You show your honesty, and HMRC shows leniency—no jail time or criminal courts for the items you confess to.

If the taxpayer rejects to accept CDF and does not cooperate with the COP9 investigation, the investigation will be handed over to HMRC Fraud Investigation Team Specialist Branch. It gives the impression that HMRC will work on the pertinent data and conduct the proper investigation to calculate the amount of tax that was avoided. If there is sufficient evidence to demonstrate that a person made an intentional effort to deceive HMRC by falsifying the facts and data in the issue, HMRC may opt to prosecute criminal charges against that person. HM Revenue and Customs Service have the power and authority to lawfully seek information about taxpayers’ financial and commercial concerns from third parties, which may harm their reputation. This information may also be obtained through a freedom of information request. They can carry out this activity without invading the privacy of anyone. If cooperation is not provided, the HMRC reserves the right to apply the highest possible penalties, and there is a greater possibility of being “named and shamed” in public.

When a taxpayer is suspected of tax fraud, HMRC will notify them in writing and provide a copy of the Code of Practice 9 letter, notes and guidance about the process and CDF. Taxpayers will also receive the documents required to decide if they can accept CDF or deny any wrongdoings. Anyone who receives a COP9 letter from HMRC should seek the advice of a specialist tax advisor to ensure they are informed of the CDF contract’s ramifications.

HMRC only offers CDF under COP9 Investigation in the hope that the taxpayer would make a full disclosure rather than the partial one they may otherwise be inclined to make. While HMRC believes the taxpayer will come clean about any disclosure, it will not discuss its suspicions at this stage. If a taxpayer accepts HMRC’s offer and accepts the terms under the Contractual Disclosure Facility, which guarantees they won’t be prosecuted if they don’t break the contract, the taxpayer will be required to make an “outline disclosure” that includes a brief statement of the following items:

• The behaviour of taxpayers that leads to a tax evasion
• Details on all the involved people, including financial associates and business
• Details of Assets and Liabilities
• Estimated Tax which taxpayer owes to HMRC
• A synopsis of the available accounting and supporting paperwork

In the outline disclosure, the taxpayer must explain what happened, when, and why, as well as the tax repercussions. In all cases supporting evidence in the form of business books of accounts, personal and business bank statements, and other evidence must be included in a detailed report to back the outline disclosure.

If HMRC believes the outline disclosure is inadequate or erroneous, it will withdraw CDF and start its investigation. In the worst situation, HMRC may involve Crown Prosecution Service to make a criminal case against the taxpayer.

HMRC takes the CDF seriously. If you:

• Hide Information about certain transactions,
• Lie about how much money you earned,
• Miss key deadlines without a valid reason, or
• Refuse to cooperate,

HMRC can cancel the contract. They won’t wait around. They can switch to a criminal route and charge you with tax offences. At that point, you lose the protection offered by the CDF.