Tougher procedures to tackle serious tax fraud will be introduced this month, meaning those who refuse to sign a civil contract detailing their wrongdoing could end up facing a criminal prosecution, HM Revenue and Customs (HMRC) has warned.
Under the new clampdown, HMRC will contact taxpayers in writing to tell them they are suspected of a fraud, giving them the chance to enter into a contract to disclose what they have done wrong within 60 days.
In return, the revenue body will agree not to criminally investigate the matter, taking away the risk of prosecution by HMRC.
The investigation will then be carried out using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.
Those who choose not to make the commitment will face a “full investigation” which could include a criminal investigation with a view to prosecution.
Anyone who signs the contract but does not go on to admit and give details about their wrongdoing will also face the possibility of a criminal investigation, HMRC warned.
An HMRC spokeswoman said that the contracts would be a new element to its civil investigations, making it harder for those under scrutiny to say they would go along with an arrangement and then fail to disclose what they knew, dragging out cases and running up costs.
She said people would not be able to “get off” by signing the contracts as they would need to pay the penalties involved.
Civil investigations are carried out in cases where a criminal one is not considered the most cost-effective way to tackle fraud, or for situations where a prosecution is thought unlikely to be in the public interest.
The new procedures will come under HMRC’s new Contractual Disclosure Facility (CDF) which launches on January 31, following a consultation.
The Chartered Institute of Taxation welcomed the plans, saying it would give greater clarity.