How to Avoid Prosecution in HMRC Cases

When HMRC suspects tax fraud, the consequences can be severe — from heavy financial penalties to criminal prosecution. For wealthy individuals, the risk is even greater as HMRC sharpens its focus on high-value cases.

One of the few ways to avoid prosecution is through HMRC’s Contractual Disclosure Facility (CDF). This facility allows individuals to make a full voluntary disclosure of tax fraud in exchange for immunity from criminal investigation.

What Is the Contractual Disclosure Facility (CDF)?

The CDF is HMRC’s formal process for individuals to admit to tax fraud and disclose irregularities in return for:

• Immunity from criminal prosecution (provided disclosure is complete and honest).
• A negotiated settlement covering tax owed, interest, and reduced penalties.
• The ability to put past irregularities behind them without facing court action.

It is offered under HMRC’s Code of Practice 9 (COP9), which applies to cases where HMRC suspects serious tax fraud.

Who Can Use the CDF?

The CDF is designed for individuals who:

• They have deliberately evaded taxes through underreporting income, hiding assets, or improperly using offshore structures.
• Want to come forward voluntarily before HMRC investigates.
• They are willing to provide a full and truthful disclosure of their tax affairs.

Importantly, the CDF is not available once HMRC already has evidence or has opened a criminal investigation. Timing is everything.

How the CDF Process Works

The CDF follows a structured procedure:

1. HMRC Offers or You Apply: HMRC may send a CDF invitation letter if it suspects fraud. Alternatively, you can make a voluntary approach before receiving a letter.
2. Outline Disclosure (60-Day Window): You must confirm within 60 days whether you accept the CDF offer. An Outline Disclosure must then be submitted, summarising all tax fraud irregularities.
3. Full Disclosure Report: A detailed report is prepared, including:
   1. A timeline of irregularities.
   2. Explanation of how the fraud was committed.
   3. Supporting documents (bank statements, offshore records, etc.).
   4. This report is usually prepared by a specialist tax advisor to ensure completeness.
4. Negotiated Settlement: HMRC agrees a financial settlement covering:
   1. Unpaid tax.
   2. Statutory interest.
   3. Reduced penalties (often significantly lower than if fraud was discovered).
5. Immunity from Prosecution: If HMRC accepts the disclosure as complete, the taxpayer avoids criminal charges.

Why Timing Is Critical

The key benefit of the CDF is immunity from prosecution. However, this is only available if HMRC does not already hold evidence of tax fraud.

This is why civil proceedings, such as divorce or probate disputes, are so dangerous: once irregularities are revealed in open court, HMRC may launch its investigation — and the opportunity to use the CDF may be lost.

In practice:

• Before HMRC investigates, Full CDF protection is possible.
• After HMRC has evidence, CDF may not apply; the prosecution risk increases.

Benefits of Using the CDF

1. Avoids Criminal Prosecution – The biggest advantage is immunity from fraud charges.
2. Reduces Penalties – Penalties under the CDF are often significantly lower than in contested investigations.
3. Provides Certainty – A clean slate, once settlement is reached.
4. Protects Reputation – Avoiding prosecution means avoiding publicity in criminal courts.

Risks of Not Using the CDF

Failing to act early can mean:

• Loss of immunity – If HMRC investigates first, prosecution may follow.
• Maximum penalties – Up to 200% of unpaid tax in offshore cases.
• Criminal charges – Fraud prosecutions can result in prison sentences.
• Reputational damage – Public trials can destroy careers and personal standing.

Why Wealthy Individuals Are at Higher Risk

HMRC’s High Net Worth Unit specifically targets individuals with complex financial affairs. Wealthy taxpayers are more likely to:

• Use offshore trusts or companies.
• Engage in inheritance tax planning.
• Own assets in multiple jurisdictions.
• Be involved in disputes (e.g., divorces) where private wealth is exposed.

As HMRC recruits 5,500 new investigators and pushes for 20% more prosecutions, wealthy individuals are at the forefront of its enforcement strategy.

When to Seek Professional Help

Handling a CDF disclosure requires specialist expertise. Tax advisors can:

• Assess whether the CDF is the right option.
• Draft the Outline Disclosure and Full Report.
• Negotiate penalties with HMRC.
• Protect your position if HMRC challenges the disclosure.

Attempting to manage the process without expert representation is risky — any omissions or inaccuracies could render the immunity agreement invalid.

The Contractual Disclosure Facility (CDF) is a powerful tool for avoiding criminal prosecution in HMRC tax fraud cases. But its benefits depend on timing and complete disclosure.

For wealthy individuals, the risks of being caught are increasing, especially with HMRC’s increased funding, new investigators, and a focus on civil proceedings, such as divorce cases.

If you suspect irregularities in your tax affairs, the safest course is to act proactively — before HMRC comes knocking.

Concerned about past tax irregularities? Our specialists provide confidential advice on the CDF and COP9 process, helping clients avoid prosecution and minimise penalties. Book your private consultation today