HMRC Change Policy on Fraud

HM Revenue and Customs (HMRC) have announced that they no longer intend to follow the procedure laid out in Code of Practice 9 for investigating cases of civil evasion of taxes (‘tax or VAT fraud’) where the sums of money involved are small.

Code of Practice 9 covers cases in which tax evasion is suspected, but for economic or policy reasons HMRC do not wish to launch a criminal investigation. It is relatively expensive for HMRC to follow the Code of Practice, so they are proposing to deal with ‘low value’ cases using a different procedure.

Under the new procedure, the taxpayer will be dealt with by a specialist team which will inform them that they are suspected of dishonesty. The taxpayer will be informed of the nature of the suspected dishonesty (i.e. undisclosed sales), but will not be told the exact nature of the evidence held by HMRC of the criminal conduct. HMRC will invite the taxpayer to cooperate with their enquiries and will explain to the taxpayer how cooperation can reduce the assessable penalties based on the underpaid tax.