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New era for tax investigations?
The Taxman says that he's now taking a much harsher line in suspected cases of fraud. Surely that couldn't include you?
New strategy. Following last summer's consultation on changing the way in which investigations are settled, the Taxman has published his revised Code of Practice 9(COP9) on the “Investigation of Fraud” and it doesn't make pleasant reading.
What is tax fraud? The word fraud conjures up serious dodgy dealing involving big sums of money, but by definition it can mean gaining any advantage, typically financial, by deception. The Taxman's new approach puts those who underpay tax into two categories: those who make mistakes and those who commit fraud; worryingly there seems to be no middle ground.
Owning up. Where the Taxman suspects unfair and deliberate tax avoidance, he'll issue COP9. This includes a “contractual disclosure facility” (CDF) form on which you're supposed to admit to all instances where you have unfairly dodged tax. If you do this to his satisfaction, he won't make a criminal case against you. If you don't own up, the implication is that he'll take a much tougher line. We think this borders on coercion which may scare innocent taxpayers into signing the admission form.
Early days. It will be a while before we get an idea of how the Taxman intends to apply his new strategy. Will COP9 be issued as a matter of course in every tax enquiry? We hope not and we'll be keeping a close eye on how this new strategy develops.
Trap. If you receive a copy of COP9 from the Taxman, don't ignore it. If you don't respond within 60 days he'll treat this as an indication that you won't co-operate. Our advice is to contact your accountant immediately.
Tip. Don't be bullied into signing a CDF. By doing so you'll be admitting deliberate unfair tax avoidance. This will automatically bump up the level of penalty the Taxman can charge if it's agreed you've underpaid tax.
It's surprisingly easy to fall into the Taxman's definition of fraud. It's not yet clear how widely he'll apply his new tax collection strategy, but if you receive a copy of COP9, call your accountant immediately
If you need more information on tax investigations or if you have been selected for investigation dont hesitate to get in touch on 0191 386 4786
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