Both the old and the new versions of the Code of Practice state that, if the taxpayer decides to co-operate, attendance at meetings will be regarded as an important part of that co-operation. For the first time, however, the new version goes on to say that:
‘If you choose not to attend (a meeting) and respond… HMRC… will take into account your conduct during the course of the investigation in determining the level of any penalties due.’
Because of the seriousness of the investigations carried out by Special Civil Investigations (SCI) (previously SCO), and because the evidence they will already have before starting the investigation, it is generally considered to be in the client’s best interests to recommend that they attend meetings. It is not uncommon, however, to terminate the meeting after the formal questions have been answered and to maintain that a full and complete disclosure by way of a report within the agreed time-limit constitutes full co-operation, earning the highest level of reduction of the penalty under this heading. It would appear that this position remains justifiable as the Code of Practice says that choosing not attend and respond will be taken into account in determining the penalty.
At the opening meeting HMRC will not reveal the information they hold that has given rise to their concerns. This has always been the practice and the reason for it is the belief that the taxpayer will limit any disclosure to the matters already known to HMRC. In its response to the HMRC Consultation paper, the ICAEW urged HMRC to consider, at least on a trial basis, disclosing their concerns at the outset of the investigation. It is their view that doing so would make the procedure more effective and reduce the length of the investigation.
They also argue that even under the new procedures, someone faced with the ‘new Hansard’ is subject to a criminal charge. ‘Charge’ under art.6 (3) of the European Convention on Human Rights has been held in Eckle v Federal Republic of Germany ((1983) 5 EHRR1) to mean ‘the official notification given to an individual by the competent authority of an allegation that he has committed a criminal offence’. If this argument is correct, the taxpayer has a right to be informed promptly of the nature and cause of the accusation against him.
From a practical point of view, the ICAEW argues that disclosure by HMRC of the reasons for the investigation would impress on the taxpayer the extent of HMRC’s knowledge of his affairs and failure to make correct returns. This would be sufficient, in their view, to encourage him to make an immediate and full disclosure.
While this is debatable, there can be no disputing their final point. If the taxpayer decides not to co-operate, HMRC will have to argue their case before the Commissioners. At that stage they will have to disclose what information they hold.