TTOG11110 - Civil Investigation of Fraud (Code 9): historical record: general: introduction to civil investigation of fraud

This guidance deals with a procedure for civil investigation of fraud (CIF), effective within HMRC from 1 September 2005 under Code of Practice 9, for dealing with cases where there is a suspicion of serious fraud or dishonesty across either the direct or indirect tax regimes (or both). The CIF procedure must only be operated by officers authorised to use it within HMRC.

For the avoidance of doubt, the introduction of CIF replaces New Approach, including Notice 730 and other Customs, Excise and Environmental taxes CEP procedures and Hansard.

Cases registered under any of the procedures listed above prior to 1 September 2005 will continue to be dealt with under the respective existing instructions; for example New Approach [VAT Information Sheet 01/02] and Hansard (Code of Practice 9).

The CIF procedure is designed to stimulate a full disclosure of irregularities. It is important to demonstrate that we have an open mind and have not ruled out the possibility of an innocent explanation. CIF gives taxpayers a choice. They may either fully co-operate with the process, and respond by making a full disclosure of irregularities, or they may deny irregularities or simply make no response at all. CIF will only be used in cases where there is a suspicion of serious fraud.

The investigation will be conducted with a view to the recovery of tax and interest and the imposition of a civil penalty, and not with a view to prosecution. The CIF procedure offers the taxpayer an inducement and the opportunity to make a full disclosure of all irregularities in recognition of which increased penalty reduction will be given. If we are satisfied after the investigation that the disclosure is full and complete, matters will proceed to a monetary settlement. Within the procedure we explicitly state that the decision to adopt the approach and provide information is entirely voluntary on the part of the taxpayer, ensuring compliance with the Human Rights Act Article 6 (HRA).

The detail of our evidence/concerns will not be disclosed to the taxpayer, as the CIF procedure is an opportunity for the taxpayer to make a full disclosure. We will, however, need to indicate the tax regime(s), direct taxes or indirect taxes or both, under which our concerns lie. In the case of indirect taxes only, it will also be necessary to distinguish between the head(s) of tax or duties (eg VAT, Excise & Alcohol) that gives rise to our concerns. This not only preserves the integrity of the system but also reduces our exposure to challenge under the Human Rights Act and allegations of “fishing”. It also reduces the risk of criticism as a result of a taxpayer spending significant time and money investigating a tax area where we have no concerns and no irregularities exist.

The decision to adopt a case under the CIF procedure is an important one because, once we make a challenge under these civil procedures (rather than criminal procedures), there can be no question of reverting to a criminal investigation for the conduct giving rise to the specific tax offences. It is therefore important to ensure robust systems are in place in relation to the adoption of cases (including an interface with FIS Criminal ) and that there is a clear audit trail (including all necessary computer entries) on the decision making process.

This guidance applies to the taxes listed below, providing a single procedure to deal with the full range of tax irregularities that may be identified in any single entity.

  • VAT
  • Income Tax
  • Corporation Tax
  • NIC
  • Capital Gains Tax
  • Inheritance Tax
  • Landfill Tax
  • Excise Duty [Alcohol, Tobacco and Oils]
  • Climate Change Levy
  • Aggregates Levy
  • Insurance Premium Tax
  • Air Passenger Duty
  • PAYE
  • Customs/International Trade duties (commercial)

The CIF procedure will not apply to Customs/International Trade Civil Investigations into non-commercial fraud, carried out at ports and airports.