A new Contractual Disclosure Facility (CDF) was launched by HMRC on 31 January 2012. The CDF is a facility for taxpayers to disclose serious tax fraud to HMRC. The CDF is only suitable for taxpayers who want to admit to tax fraud. It is not a method to notify HMRC about errors, mistakes or avoidance schemes where no fraud has taken place. If HMRC writes to an individual about a suspected tax fraud they will be offered the opportunity to use the CDF. The CDF can also be used by taxpayers wishing to disclose their part in a tax fraud.

Under a CDF HMRC will not criminally investigate and prosecute taxpayers over fraud disclosed as part of the CDF contract. However, the taxpayer must commit to the following:

• Tell HMRC about all taxes that have been deliberately evaded, with no exceptions.
• Give HMRC details of all taxes evaded within 60 days of being offered the contract.
• Sign a statement to say accurate and complete details of the tax fraud have been provided.
• Pay all taxes, duties, interest and penalties due.
• Stop any fraud immediately.

If all the conditions are met, the investigation will then be carried out using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.

Under CDF there are 3 options:

• Owning up to fraud: the CDF route.
• Deciding not to own up to fraud: the denial route.
• Not replying to HMRC: the non-cooperation route.