COP 9 - Special Compliance Office investigations - Cases of suspected serious fraud - Superseded by Code of Practice 9(2005) for investigations commencing after 1 September 2005

Contents

This Code of Practice explains how we, the Special Compliance Office, carry out investigations into cases where serious fraud is suspected and the investigation is not being conducted with a view to criminal prosecution.

Introduction

Most taxpayers pay what is due and others make genuine mistakes.

If we suspect someone is deliberately trying to pay less tax, we will conduct a thorough investigation.

We want taxpayers to pay the right amount of tax.

This Code of Practice covers cases where we suspect serious fraud and gives you the opportunity to fully disclose all irregularities in your tax affairs.

We promise to treat you fairly and courteously in accordance with the law and ‘Our Service Commitment to you'.

If at any time the Board decides to investigate with a view to criminal prosecution, this Code of Practice will cease to apply.

General

We will investigate any situation where we suspect serious tax fraud. This includes the tax affairs of individuals, partnerships, companies and trusts. We set high standards for the way we work.

This code describes how we give you an opportunity to tell us what, if anything is wrong with your tax affairs and how you can disclose all irregularities. We take over responsibility for some investigations started in local offices and in other parts of the Inland Revenue, and start others ourselves.

We will liaise with your Tax Office during the investigation and at its conclusion. Whilst the investigation is in progress, we may deal with some or all aspects of your Self Assessment (SA) tax returns. At the end of the investigation, your Tax Office will again take over responsibility for your tax affairs.

Confidentiality

You have a right to the same high degree of confidentiality as all taxpayers. We will only give information to others when authorised to do so or in circumstances allowed by the law.

We are a Data Controller under the Data Protection Act. We hold information for the purpose of taxes, National Insurance contributions, tax credits and legal functions given to us by Parliament, and can use the information for our internal functions.

We might check new information we receive about you with our existing records. This includes information provided by you as well as others, such as other Government departments and agencies and overseas tax authorities. We will not give information about you to anyone outside the Inland Revenue unless the law allows us.

We will be discreet if we need to ask other people or organisations for information about you or your business during our investigation.

If you have given us a mandate (an authority for a third party such as a bank to provide us with information) we might use it to help our investigation. Mandates can help us get information usually available only to you. So, we will sometimes need to use our legal powers whether you have given us a mandate or not.

Co-operation

It is entirely for you to decide whether to co-operate with our investigation. In making your decision you may wish to obtain assistance from a professional adviser. If you do obtain such assistance your adviser can accompany you at all meetings with us. He or she may also correspond with us on your behalf. See below for further comments regarding co-operation.

Professional representation

We recommend that you approach a professional adviser to represent you during our investigation although again this is a matter for you.

You have a right to legal representation at any meeting conducted under Code of Practice C Police & Criminal Evidence Act 1984 Codes of Practice (see 'Meetings' below).

You have to meet the cost of engaging legal or other professional representation.

You may change or stop using a professional adviser at any time. You should give your professional adviser all the facts because you are personally responsible for your tax affairs and the accuracy of any information supplied to us.

We expect high standards from professional advisers. We will normally deal with your adviser but if there are delays or difficulties we might deal directly with you.

Meetings

If you decide to co-operate with us, we regard attendance at meetings as an important part of that co-operation.

Meetings give us both a chance to ask questions and clarify points as the investigation progresses.

The first meeting with you will be tape recorded and conducted in accordance with Code of Practice C Police & Criminal Evidence Act 1984 Codes of Practice.

This means that you will be cautioned in the following terms before questions are put to you.

"You do not have to say anything. But it may harm your defence if you do not mention when questioned something that you later rely on in Court. Anything you do say may be given in evidence."

The purpose of Code of Practice C is to make you fully aware of your rights, including the right not to answer our questions. It also informs you how we might use your answers. This does not mean that we are looking to prosecute you.

It might also be necessary to tape record and apply Code of Practice C Police & Criminal Evidence Act 1984 Codes of Practice at meetings with you later in the investigation.

Where interviews are tape recorded you or your adviser will be provided with a copy of the tape.

If interviews with you are conducted under Code of Practice C, you have a right to legal advice. You may also wish to bring your accountant or professional adviser to the meeting.

You will be free to leave a meeting with us at any time if you choose to do so. You will not be under arrest.

The issue of a caution does not mean that we are looking to prosecute you. We are conducting this investigation with a view to a financial settlement in the expectation that you will make a full disclosure of all irregularities.

Any meetings you have with us can be at

  • the offices of your professional adviser
  • our office or another Inland Revenue office
  • your business premises, or
  • your home.

If the meeting is conducted under Code of Practice C it is most likely to be at an Inland Revenue office or that of your professional adviser.

You can get a copy of Code of Practice C of the Police and Criminal Evidence Act Codes of Practice at the Home Office website (www.homeoffice.gov.uk).

Please tell us in advance if you need an interpreter or have any special needs so that we can take these into account when we prepare for the meeting.

Opening the investigation

Before we begin an investigation or take over an existing one, we will look at the information in your tax returns, accounts and statements, and from other sources. We might also contact other people or organisations before we contact you or your professional adviser.

If we decide to investigate under this Code we will tell you and your professional adviser in writing.

We will invite you to a meeting to advise you of the practice of the Board of Inland Revenue in cases of serious tax fraud. This meeting will be tape recorded and will be conducted in accordance with Code of Practice C of the Police & Criminal Evidence Act 1984 Codes of Practice (see 'Meetings' above).

A copy of the Chancellor of the Exchequer's statement setting out the Board's practice (reproduced below and commonly referred to as the ‘Hansard Statement' or ‘Hansard') will be given to you at the meeting by an authorised officer of the Board.

An authorised officer for these purposes is a current serving member of the Inland Revenue Special Compliance Office.

A copy of the Hansard Statement will normally only be given at a meeting with you. In exceptional circumstances, we may agree to give Hansard by post. This will be a matter for us to decide.

We will not reveal to you the information that has given rise to our suspicion of serious fraud because an investigation under this Code of Practice gives you the opportunity to make a full and complete disclosure of all irregularities. The opportunity to make a disclosure extends to all aspects of your taxation affairs and encompasses any dealings you have had with partnerships, companies, trusts or other entities.

Once you have been made aware of the practice of the Board of Inland Revenue concerning serious tax fraud, we will ask you questions about your accounts and tax returns. These questions are listed below. Exceptionally, the questions may be modified to fit the particular circumstances of the case. We expect these questions to be answered either ‘yes' or ‘no'. You should consider your answers to these questions (in consultation with your professional adviser) before you attend the opening meeting.

We expect you to be open and truthful and to tell us all relevant facts necessary to put your affairs in order. If you are unsure whether particular facts are relevant you should tell us anyway.

If you have made a disclosure to us in response to the Hansard statement we want you to tell us at the opening meeting the nature of what needs to be disclosed. We do not necessarily expect precise details at that time but will ask you for an explanation of the amounts involved, how the irregularities were committed and over what period they occurred. The information you provide should be to the best of your recollection. You should discuss this with your adviser first.

If you tell us at the opening meeting that there are matters that you need to disclose, we will invite you to instruct a professional advisor to prepare a detailed investigation report setting out your full disclosure. This report is known as your ‘Disclosure Report'.

It is for you to decide whether to instruct a professional adviser to prepare the Disclosure Report or to undertake any other work in connection with our investigation.

We will start our own enquiries if you indicate that you have no disclosure to make.

Deliberate failure on your part to admit all irregularities in your tax affairs or to make a disclosure of them (including any business in which you have been involved as a company director or partner), may make you liable to prosecution. The submission of any certificate or other statement that you know to be false may also make you liable to prosecution.

You will not be prosecuted if you make a full disclosure of all tax irregularities and are truthful in your dealings with us.

During the investigation

We will always be courteous, fair and professional and will only ask for the information we believe to be necessary.

If you have told us that you need to make a disclosure in respect of your tax affairs we will want to agree a timetable with you and your advisers for the submission of your Disclosure Report. The timetable will vary according to the complexity of the case and the volume of the work that needs to be carried out, but we would normally expect the Disclosure Report to be submitted within six months of the opening meeting.

You must bear the cost of producing the Disclosure Report and of dealing with our investigation, as it is your responsibility to put your affairs in order. The costs are not allowable for tax purposes.

We will monitor progress. We will suspend our own enquiries until we receive the Disclosure Report if we are satisfied that matters are progressing towards a full disclosure of tax irregularities within a reasonable period of time.

We will carry out the investigation ourselves if we are not satisfied with progress and will tell you if we need to do this.

We will ask you for statements of your assets and liabilities, and your bank and other accounts including debit and credit cards operated. You will be asked to certify that these statements are complete and accurate to the best of your knowledge and belief.

It is your responsibility to ensure that the Disclosure Report is correct and complete to the best of your knowledge and belief. We will ask you to certify that this is the case and we will not accept the report as your disclosure unless you do so.

False statements can result in prosecution.

We will need to investigate the report to satisfy ourselves that it is correct and complete. If you ask us we will, where possible, indicate our expected timetable for reviewing and investigating the report.

If in the course of our own investigation information is held or obtained to suggest that you have not made a full and complete disclosure, in spite of being given the opportunity to do so, we could withdraw this Code of Practice and start investigating with a view to criminal prosecution.

Your costs

You have to pay for any costs that you incur dealing with our investigation, including the fees of a solicitor, accountant or other professional adviser.

We know that dealing with our enquiries can cost you time and money, so we will make sure that our enquiries are reasonable and necessary to your case.

We will close our enquiries as soon as we are satisfied that your tax affairs are in order or settled.

Our factsheet C/FS 'Complaints and putting things right' (PDF 264K) explains when we pay compensation for mistakes we make.

Keeping you informed

You can ask us at any time to explain

  • your legal rights
  • why we have taken a particular action
  • your obligation under the law.

You can ask for these explanations even if we have already given them to your professional adviser. You can also ask for a copy of any of our other publications.

We might not be able to give you prior notice if we need to use our legal powers to get information. Sometimes the law allows us to get information without your knowledge.

We will deal promptly with letters from you or your adviser, normally within 20 working days. If we cannot do so we will let you or your professional advisor know the reason for the delay.

Providing information

We will often ask you for the information and documents that we need. We will give you a reasonable amount of time to provide any information. If you think that we have not given you enough time you should tell us how much more time you need and why. We will let you have more time if this seems reasonable. If we cannot agree we will explain our reasons.

You should tell us straightaway if you have difficulty obtaining the information we have requested and we will discuss with you how you might obtain it. You should also tell us if you think the information is not relevant to our investigation. We will discuss and try to agree the situation with you.

Parliament has given us powers to obtain information. If we need to use these powers we will make sure that any representations you have made, and all the relevant facts are taken into consideration and put forward in any application we make before a Commissioner of Income Tax. The Commissioner is independent of the Inland Revenue.

You should ensure that any information you provide and any answers you give are correct. If you are unsure about any matter you should say so. It is important that you give us all the relevant facts even if you are in doubt about the tax consequences of a particular matter. If, subsequently, you realise that something you have told us or given to us may have been wrong, you should tell us straightaway.

You have the right to ask us why we are continuing with our investigation if, for example, you believe that you have provided all the relevant information and explanations and we have had adequate time to investigate the position and bring matters to a close. If we are unable at that time to conclude the investigation, we will explain the reasons why. For example, we may feel it necessary to seek further information by approaching other people or organisations.

Where our investigation includes an enquiry into a Self Assessment tax return, you may ask the Appeal Commissioners to consider whether that enquiry should be closed. We can explain to the Commissioners the reasons for not closing that enquiry. You may wish to discuss matters with your professional adviser before deciding to do so.

Records

You must keep certain records to help you to complete your Self Assessment (SA) tax return. You should read leaflet SA/BK4 ‘Self Assessment. A general guide to keeping records'. You can get this from any Inland Revenue Enquiry Centre, local Tax Office or from our website www.inlandrevenue.gov.uk

Please make sure that you keep all existing records, including computer records, during our investigation whether or not you are required to do so by law.

We may ask to see your business and private financial records. We can arrange to examine these at your premises. Where necessary we may ask to retain original records or copies.

You may ask us to return any records that we hold if you need them at any time. If we have to keep them we will give you copies of any documents you need. We will do this free of charge and we will agree a timetable for this.

We will advise you, if necessary, what you need to do if your business or personal records do not meet the legal requirements, or if we consider they are inadequate in any other way. If you are still in doubt about the records you need to keep for the future you should ask your professional adviser or us to help.

Paying tax during our enquiries

We will ask you to make a payment on account towards any tax we think you owe while we wait for you to complete your Disclosure Report, or pending the conclusion of our investigation. Making a payment on account will help to reduce any interest charges and will demonstrate your willingness to reach a money settlement.

We might make a provisional amendment to your or your company's Self Assessment before the end of our investigation, if we think that you might not pay any additional tax due unless we act quickly. We could also make assessments for earlier years.

You have the right to appeal against these assessments or amendments and can ask to postpone payment. If we cannot agree, you can ask the Appeal Commissioners to decide how much tax you should pay.

Self Assessment tax returns

An investigation under this Code of Practice refers to the whole of your tax affairs, not just your current Self Assessment tax return.

You must send us complete and accurate tax returns by the legal deadline even if we are investigating your tax affairs under this Code. We will regard it as a serious offence if you deliberately submit an incorrect tax return.

If you cannot provide final figures you should include your best estimated figures in your tax return and highlight any figures you think will be affected by our existing investigation.

Appeal hearings

You have 30 days to appeal to independent Appeal Commissioners against

  • any amendment we make to your or your company's Self Assessment, or
  • any assessment we make that you do not think is correct.

You can find out how to appeal by

  • reading the notes with the amendment or assessment, or
  • asking us to explain the process to you.

We will try to reach agreement with you about your or your company's tax liabilities without a formal appeal hearing. If we cannot agree, we both have the right to ask the Commissioners to hear any appeal.

We can arrange for the Commissioners to hear your appeal or you can contact them yourself. We will give you the address of the Clerk to the Commissioners on request.

Where you request an appeal hearing we can ask the Commissioners for an adjournment if we need more time to investigate. Likewise, if we request the appeal hearing and you need more time to provide information you can ask the Commissioners for an adjournment. In both cases, the Commissioners will decide if they will accept the request for an adjournment.

If we are making little or no progress settling your appeal by agreement, we might ask the Commissioners to settle it. We will tell you if we intend to do this. We will explain our proposed figures (which might be different from the ones we suggested to you during our negotiations) at least 14 days before the date fixed for the hearing, unless there are exceptional circumstances.

You have the right to put your case to the Commissioners and to tell them the figures you believe are correct. You can choose whether to have your case presented for you by a professional representative or by any other person, providing the Commissioners do not object.

After listening to both parties and considering all the evidence, the Commissioners will decide whether the amendment or assessment should remain unchanged, increased or reduced.

You can ask us or the Clerk to the Commissioners to explain anything you do not understand about the appeal hearing procedure.

Concluding the investigation

If our investigation finds nothing wrong with your tax affairs, we will let you know that our investigation has finished.

If we find something wrong and you have made a full disclosure, we will accept a money settlement. So if you make a full confession in response to Hansard, we will not prosecute you even if we find that you have committed serious tax fraud.

When seeking a money settlement we will try to reach an agreed figure with you covering the amount of tax, interest and penalties we believe are due. We will only suggest adjustments that we consider to be reasonable in the light of the information we hold.

You should ask us to explain if you do not understand any of the figures we may propose.

If we cannot reach agreement we may seek to determine formally the tax, interest and penalties we consider appropriate.

We can use the information or documents that you provided during the investigation in any proceedings to determine your liability to tax, interest and penalties.

Where there have been errors or omissions in your accounts or tax returns we will ask you to sign a Certificate of Full Disclosure confirming that you have now declared all your taxable income, gains and other duties. We will not ask for a certificate if the investigation showed nothing wrong.

We will take a very serious view if you sign a Certificate of Full Disclosure you know to be false. You should consider the certificate very carefully before signing it. If you sign a certificate you know is false, you may be liable to prosecution.

You should always make sure you understand what, if anything, was wrong with your accounts or tax returns. You should ask your professional adviser or us what you need to do to make sure you get them right in the future.

Interest, surcharge & penalties

We will charge interest on any tax paid late. You could also have to pay a penalty.

We can charge you a penalty for an incorrect tax return if it was delivered fraudulently or negligently or if you find that it is incorrect and fail to correct the error within a reasonable time.

You are responsible for the accuracy and completeness of your tax return even if a professional agent or adviser is acting on your behalf.

When calculating any penalty we will take into account

  • the extent of any voluntary disclosure of irregularities you make
  • your co-operation with our investigation such as attending meetings and providing information and documents
  • the seriousness of your errors or omissions.

Our leaflet IR160 ‘Enquiries under Self Assessment. How settlements are negotiated' explains how we calculate penalties.

You should tell us about anything you think is relevant when we are working out the penalty to charge.

In some cases, we could charge you a surcharge as well as interest and penalties.

False Statements

You should make sure that answers given to us at meetings and in correspondence, including statements or questionnaires, are correct to the best of your knowledge and belief.

If you make a statement you know is false you may be prosecuted.

Suggestions

We appreciate that you might find our investigation unwelcome, but we set high standards for the way we investigate fraud.

If you have any suggestions about our standards or about this Code of Practice please write to

The Director
Inland Revenue Special Compliance Office
Room 326
New Court
48 Carey Street
London WC2A 2JE

Complaints

Please tell us if you believe

  • we have not followed our Code of Practice
  • you or your company have been denied your rights in some respect
  • we have made a mistake
  • we have treated you or your company badly during our investigation.

To help you complain, and to avoid any future inconvenience to you, we have an easy to follow complaints procedure. We will try to settle your complaint as quickly as possible.

Our factsheet C/FS 'Complaints and putting things right' (PDF 264K) explains our complaints procedure.

Hansard Extract

In reply to a Parliamentary Question the Chancellor gave the following answer regarding serious tax fraud.

“ The practice of the Board of Inland Revenue in cases of suspected serious tax fraud is as follows.

The Board reserves complete discretion to pursue prosecutions in the circumstances it considers appropriate.

Where serious tax fraud has been committed, the Board may accept a money settlement instead of pursuing a criminal prosecution.

The Board will accept a money settlement and will not pursue a criminal prosecution, if the taxpayer, in response to being given a copy of this Statement by an authorised officer, makes a full and complete confession of all tax irregularities.”

The five questions which are asked in conjunction with the Hansard extract

Question 1

Have any transactions been omitted from or incorrectly recorded in the books of any business with which you are or have been concerned whether as a director, partner or sole proprietor?

Question 2

Are the accounts sent to the Inland Revenue for each and every business with which you are or have been concerned whether as a director, partner or sole proprietor, correct and complete to the best of your knowledge and belief?

Question 3

Are all the tax returns of each and every business with which you are or have been concerned whether as a director, partner or sole proprietor correct and complete to the best of your knowledge and belief?

Question 4

Are all your personal tax returns correct and complete to the best of your knowledge and belief?

Question 5

Will you allow an examination of all business books, business and private bank statements and any other business and private records in order that the Revenue may be satisfied that your answers to the first four questions are correct?

False statements can result in prosecution.

Further information

We produce a wide range of leaflets. Some we have mentioned which you might find useful are

Our leaflets are available at www.inlandrevenue.gov.uk and from any Inland Revenue office or Enquiry Centre. Most offices are open to the public from 8.30am to 5.00pm, Monday to Friday. Addresses are in your local telephone book under ‘Inland Revenue' and at www.inlandrevenue.gov.uk/local

You can get most of our leaflets from our Orderline, seven days a week (except Christmas Day, Boxing Day and New Years Day) by

  • phone or textphone (for Minicom users) on 0845 9000 404 between 8.00am and 10.00pm)
  • fax on 0845 9000 604
  • e-mail on saorderline.ir@gtnet.gov.uk
  • writing to

    PO Box 37
    St Austell
    Cornwall
    PL25 5YN.

Your library of Citizens Advice Bureau may also have copies of some of our leaflets, but may not have them all.

We have a full range of services for people with disabilities, including leaflets in Braille, audio and large print. For details, please ask your local Inland Revenue office or Enquiry Centre.

Our Service Commitment to you

The Inland Revenue and Customs and Excise are committed to giving you the best service we can by acting fairly and impartially

We

  • treat your affairs in strict confidence, within the law
  • want you to pay or receive only the right amount due. communicating effectively with you

We aim to provide

  • clear and simple forms and guidance
  • accurate and complete information.

providing good quality service

We aim to

  • handle your affairs promptly and accurately
  • be accessible
  • keep your costs to the minimum
  • help customers with special needs
  • be courteous and professional.

taking responsibility for our service

We

  • publish our customer service aims and achievements annually
  • want to hear from you if you wish to comment, or complain, so we can improve our service. We advise you how to do this.

We can provide better service if you help us by

  • keeping accurate and up-to-date records
  • letting us know if your personal or business circumstances change
  • giving us correct and complete information
  • paying on time.

Further information on customer service is available at Inland Revenue and Customs and Excise local offices, set out in our Charters, complaint leaflets and Codes of Practice.

These notes are for guidance only and reflect the position at the time of writing.

They do not affect any right of appeal. Issued by Inland Revenue Marketing and Communications December 2003 © Crown Copyright 2003

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