Understanding Definitions
What does Code 8 mean?
What does Code 9 mean?
What is IDEA?
What is the Hansard Procedure?
Common Questions when being investigated
What are my obligations under Money Laundering Reporting Rules?
What if no Code of Practice has been received by me?
How are penalties worked out?
How long does the investigation last?
Can I go to prison for tax offences?
Is it in my interests to prepare a disclosure report?
Can the Inland Revenue enter my business premises?
What does Code 8 mean?
Code 8 cases are handled by the Avoidance Group of the Inland Revenue and indicate that there is no suspicion of serious fraud.
What does Code 9 mean?
Code 9 indicates that the Inland Revenue suspects serious fraud but they are still seeking a monetary settlement rather than prosecution. These cases may be dealt with by SCI or CIF teams.
What is IDEA?
IDEA stands for Interactive Data Extraction & Analysis. It is a computer program used by the Inland Revenue since 2001 to interrogate accounting records
What is the Hansard Procedure?
The Hansard procedure (now know as COP9 (2005)) refers to the way in which most serious fraud cases are dealt with under the Inland Revenues Code of Practice 9. The Hansard extract states that the Inland Revenue may accept a monetary settlement instead of instituting criminal proceedings, as long as they receive a full disclosure of all irregularities.
TopCommon Questions when being investigated
What are the firm's obligations under Money Laundering Reporting Rules?
In February 2006, following substantial lobbying by the accountants professional bodies, a significant change to the Money Laundering Reporting rules became relevant for tax investigation practitioners.
Following the change in the rules, it is now possible for advisors to have meetings with individuals who have irregularities on their tax affairs in strict confidence. Because these meetings will be to advise on tax legislation and "how to put things right", such meetings will be bound by legal professional privilege and consequently it will be illegal for any contents of that meeting to be disclosed under the Money Laundering reporting rules.
This brings the status of the Accountants and Lawyers in this regard to an equal footing and should allay concerns of individuals who would have liked to talk to us on a confidential basis but were concerned about our professional reporting requirements.
The Professional bodies have pointed out that this privileged status may not be available to your regular general practitioner accountant and care should be taken before entering into such discussions so that your own position is protected.
TopWhat if no Code of Practice has been received by me?
This usually means that the Inland Revenue are seriously considering prosecution.
TopHow are the penalties worked out?
Penalties can be levied up to a maximum of 100% of the tax due however the following reductions are available:
- Disclosure - a full disclosure of tax irregularities can lead to a penalty reduction of 20%. An additional 10% is also possible for voluntary disclosure
- Co-operation - the maximum reduction possible is 40%
- Gravity - a maximum of 40% is possible.
How long does the Investigation last?
Most investigations undertaken by the SCI last between 12 and 18 months although recently there has been an effort to reduce this to 6 months.
TopCan I go to prison for tax offences?
The SCI can prosecute and people have served jail terms for tax offences. However provided a full confession of tax irregularities is made, and the Hansard procedure is offered, the Inland Revenue will not prosecute.
TopIs it in my interests to prepare a Disclosure report?
Usually yes. These are generally only suggested for SCI investigations and are standard in all Hansard (Code of Practice 9) investigations. However, we would advise using a firm such as ours, who have previous experience of preparing such reports.
TopCan the Inland Revenue enter my home or business premises?
Most Inland Revenue investigators do not enter your home or business premises unless invited. However in some extreme serious fraud cases some suspects have been subject to a dawn raid. The Inland Revenue have powers to carry out ‘surprise visits’. However they are rare and do not normally occur after an investigation has started provided there is co-operation for the taxpayer and his adviser.
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