This is to announce a new procedure for dealing with suspected dishonest conduct for indirect taxes, where neither criminal investigation nor the Civil Investigation of Fraud procedure outlined in Code of Practice 9(2005) is appropriate.

Code of Practice 9(2005) covers HMRC investigations of suspected serious fraud against the Exchequer where, for policy or operational reasons, it is considered inappropriate to launch a criminal investigation. Where cases are not suitable for Code of Practice 9 (2005) or criminal investigation, for direct taxes, it is already possible for income tax self-assessment and corporation tax self-assessment inquiries to lead to penalties being imposed for either negligent or fraudulent conduct. However until the new penalty provisions in clause 96 and schedule 24 of Finance Bill 2007 take effect, there is no equivalent procedure for dealing with lower level fraud in relation to indirect taxes, with the exception of civil evasion penalties issued at the ports for customs duties and import VAT.

This statement announces a new procedure which will enable HMRC to tackle cases where dishonesty is suspected in relation to indirect taxes. It also introduces a new public notice 160 outlining that procedure. This will bring current practices more closely in line across direct and indirect taxes and help enable a smoother transition to the new penalty regime put forward in clause 96 and schedule 24 of the Finance Bill 2007.

The procedure complements HMRC’s policy of providing a level playing field for all businesses by supporting those who wish to comply but dealing more severely with those who seek an unfair advantage through non-compliance. It will be used in appropriate cases after 1 September 2007.

A copy of the new notice, PN160, is being placed in the House of Commons Library.