Contractual Disclosure Facility (CDF)

What is HMRC's Contractual Disclosure Facility (CDF)? How does it work? What must taxpayers do under the CDF? 

This is a freeview 'At a glance' guide to the Contractual Disclosure Facility (CDF).

• HMRC has offered a CDF since 31 January 2012.
• If HMRC writes to an individual about a suspected tax fraud they will be offered the CDF.
• CDF can also be used by anyone who wishes to own up to tax fraud.
• CDF is only used for tax fraud: it does not apply to errors, mistakes or avoidance schemes.

If HMRC writes to a taxpayer because tax fraud is suspected and intends to investigate using Code of Practice 9 (COP 9), a CDF contract will be offered. The recipient of a COP 9 is encouraged to make a full disclosure of:

• Any loss of tax or duty, or payment administered by HMRC, that was brought about by deliberate behaviour (hereafter “deliberate behaviour”) and
• All other irregularities in their tax affairs (including those arising from non-deliberate behaviour, such as careless errors and errors made despite taking reasonable care).

Under CDF there are 3 options:

• Owning up to fraud: the CDF route. Accepting the contract is admission that there has been a loss of tax due to deliberate behaviour.
• Deciding not to own up to fraud: the denial route. The individual rejects the CDF offer.
• Not replying to HMRC: the non-cooperation route. This will be treated as rejection of the offer.

Where a CDF contract is entered into, HMRC undertakes refrain from criminal investigation and prosecution provided that the individual makes a full disclosure. If such disclosure is not forthcoming or the offer is rejected, the Commisioners reserve the right to start criminal proceedings.

Any fraud discovered under the CDF will be subject to civil penalties. The extent of the penalties will depend on the level of cooperation given by the taxpayer.

To use the CDF the individual must:

• Make an Outline Disclosure to HMRC within 60 days, covering both elements of the disclosure required (as set out above).
• If required, submit a Disclosure Report detailing sufficient information that HMRC consider that a complete, accurate, open and honest disclosure of all the tax and duty irregularities has been made.
• Sign a Formal Disclosure to say that accurate and complete details of the tax fraud  have been provided. This consists of 4 mandatory documents:
  
  • a Certified Statement of worldwide assets and liabilities
  • a Certificate and Schedule of all financial accounts operated
  • a Certificate and Schedule of all financial cards operated
  • a Certificate of Full Disclosure – signed and witnessed.
• Fully cooperate with HMRC to put their tax affairs in order.
• Pay all taxes, duties, interest and penalties due
• Stop any fraud immediately

External links

HMRC guidance:

HMRC Code of Practice 9 (COP9) investigation of fraud  

Admit tax fraud to HMRC using the Contractual Disclosure Facility