TaxationWeb by Burges Salmon LLP
Burges Salmon LLP outline HMRC’s new Code of Practice 9, and compare its effect on enquiry procedures with the previous civil fraud investigation process.Following the amalgamation of the former Inland Revenue and HM Customs & Excise a Consultative Committee has been considering how best to amalgamate the sometimes very different powers and procedures pre-amalgamation into a coherent and appropriate body of powers and procedures following amalgamation. We are taking a keen interest in this process and will be contributing to it where we consider appropriate.• HMRC will decide upfront whether or not a particular set of circumstances warrants criminal prosecution or investigation under the new Code 9. If it is considered that a criminal prosecution is not appropriate then HMRC effectively waive their right to commence criminal proceedings at a later date. HMRC will however be able to prosecute for any criminal offences disclosed in respect of false disclosure during the course of the investigation, for instance providing false documentation at the conclusion of the investigation. HMRC will not however even in these circumstances prosecute for the original evasion. This is markedly different than the old procedure used by the Inland Revenue where the taxpayer could never be fully confident that what started as a civil investigation would not transform into a criminal investigation in respect of the original evasion.
• Under the old procedure Inland Revenue interviews were routinely held under caution and tape recorded in accordance with Code C of the Police and Criminal Evidence Act 1984. It was thought that because of the nature of the civil penalties which can be imposed in relation to civil fraud that the European Convention on Human Rights requires that the taxpayer should be afforded the same protection as would be available in a criminal prosecution. The recent case of Khan v Customs & Excise Commissioners however has clarified that this is not the case, provided it is made clear at the outset that the investigation is not being carried on with a view to criminal prosecution. The new Code 9 expressly states this and hence HMRC consider, correctly in our opinion, that it is no longer necessary to conduct an interview under the new procedure under caution and on tape. What is surprising, however is that the new Code 9 does not reserve the right of HMRC to prosecute for the original evasion following the commencement of the investigation even if it then transpires that the facts are considerably more serious then at first realised. This is perhaps an inevitable consequence of HMRC relying on the case Khan to avoid the protections provided to a taxpayer in a criminal investigation.
• Direct and indirect taxes can now be dealt with in a single and combined investigation and series of interviews. In addition any disclosure report prepared during the course of the investigation can cover both direct and indirect taxes. This avoids the need for two separate investigations by separate tax authorities. As each of our solicitors is able to advise and represent clients on both direct and indirect taxes this should significantly reduce the costs of an enquiry for a taxpayer.
October 2005
Burges Salmon LLP
Burges Salmon is one of the UK's leading commercial law firms. With some 550 partners and staff based in Bristol, and with a presence in London, the firm provides national and international organisations and individuals with a full service through the core practice areas of corporate, commercial, finance, litigation, property and tax.
Burges Salmon's Tax and Trusts department is one of the largest in the country. Its tax services are understood to be among the most comprehensive of any law firm in the UK.
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