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Worried about being prosecuted for tax avoidance or tax evasion?

The number of investigations and possible prosecutions for tax avoidance and tax evasion is on the increase and is set to escalate over the next few years. Anyone with undeclared income should make a voluntary disclosure now to avoid the risk of prosecution. Do not wait for HMRC to approach you.

The planned increase in tax investigations has come about as a result of the additional £900 million that has been invested to fund HMRC interventions, enquiries and investigations to tackle tax evasion and avoidance. It is hoped that this will raise £7 billion through tax annually by 2014/15 to plug the budget deficit.

HMRC pursue people they suspect of tax avoidance under Code of Practice 8 (COP 8). These investigations are carried out by the Fraud and Avoidance department within the Special Investigations Office. For more serious cases of tax evasion, however, HMRC exercise their extended powers under the Contractual Disclosure Facility (CDF) using COP 9. These investigations are intent on punishing evaders by imposing significant financial penalties.

The primary objective of a COP 9 investigation is to recover tax, interest and penalties owed to HMRC. CDF (now new COP9) allows the tax authorities (pretty well uniquely) to delve into both direct and indirect tax for cases involving suspected serious tax fraud. If the suspect takes the opportunity from the outset to make a full confession of all tax fraud s/he will not be prosecuted. Under the CDF the individual has 60 days to decide whether to disclose any tax fraud with which they have been involved. In exchange, HMRC will not pursue a criminal tax investigation with a view to prosecution if tax fraud is proved, but instead will work towards a civil monetary settlement for tax, interest and a financial penalty.

It is felt, however, that more people than ever will be subject to a criminal rather than a civil investigation in the future. Particularly vulnerable are all those people in positions of trust or responsibility, or those who fall within the group for whom HMRC has introduced special arrangements for dealing with unpaid tax, for example, lawyers, doctors and tradesmen.

There is another option

Currently there is one option of guaranteeing immunity from prosecution for tax offences: the Liechtenstein Disclosure Facility (LDF). Even if you do not have an existing connection to Liechtenstein, there is a process by which your connection can be established with this jurisdiction.

Immunity under LDF applies unless the individual is involved with other criminal activities (bribery or perjury, for example). Making use of LDF is preferable to making a voluntary disclosure to HMRC and admitting to fraud under CDF.

Anyone with undisclosed tax liabilities should note that time is running out. HMRC now have extensive powers to use all information sources and have been very successful in gaining access to data on Swiss and other banks. Many individuals may already be in their sights.

LDF is due to end on 5 April 2016, after that time, HMRC will be able to apply the full range of sanctions that are at present significantly reduced under this process. But do not wait until 2016 before taking action. To make use of LDF you must register before HMRC approach you. Anyone that has already been contacted by HMRC under CDF cannot make use of LDF.

If you are worried about your tax position, whether or not you think it’s significant, telephone your account manager or speak to one of the DNS team, in confidence, today.

Do so now, before it is too late.

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