The Contractual Disclosure Facility (CDF) Explained

The Contractual Disclosure Facility (CDF) is the mechanism that sits at the heart of every COP9 investigation. It is, literally, a contract: HMRC agrees not to prosecute the disclosed conduct and the taxpayer agrees to disclose it fully. The detail of how that contract operates determines whether a COP9 ends in a quiet civil settlement or escalates into a criminal referral.

What the CDF actually is

The CDF is HMRC’s formal civil-only route for resolving suspected tax fraud. It was launched in its current form in 2012 and replaced the earlier Civil Investigation of Fraud (CIF) procedure. Crucially, it is contractual: both sides sign documents that bind them. That contractual nature is what gives the immunity its teeth, HMRC cannot simply change its mind and prosecute the disclosed conduct later.

The CDF is offered exclusively within a Code of Practice 9 enquiry. For background on the wider procedure, see our pillar COP9 guide.

The legal status of the immunity

The CDF immunity is not a statutory pardon. It is a contractual undertaking by HMRC, supported by published guidance, that it will not refer the disclosed conduct to its Criminal Investigation directorate or to the Crown Prosecution Service. The undertaking covers only the conduct disclosed. Three boundaries matter:

• Scope. Anything outside the disclosed heads of fraud is not protected.
• Truth. Statements made in the disclosure must be accurate; material misrepresentations void the immunity.
• Other offences. The CDF covers tax fraud only. It does not extend to money laundering, false accounting or fraud against third parties, though in practice prosecutors usually decline to pursue those offences once the tax matter is settled, unless the conduct is independently serious.

The Outline Disclosure form

Within the 60-day acceptance window, the taxpayer must submit an Outline Disclosure alongside the signed Acceptance Letter. The Outline is short, typically two to five pages, but its content is consequential because it sets the scope of the immunity from day one.

HMRC’s expectation is that the Outline will identify, in plain English:

• Each head of fraud (e.g. suppressed cash sales, undeclared rental income, fictitious purchase invoices, undisclosed offshore investment income)
• The taxes affected (income tax, corporation tax, VAT, PAYE, NIC, CGT, IHT, SDLT)
• The approximate periods involved
• A broad-brush estimate of the tax at stake
• Who was involved in the conduct

The Outline is not the place for detailed figures, those come later in the Disclosure Report. But every head of fraud that should be disclosed must appear here. Omissions cannot be cured later without significant cost.

What counts as a valid disclosure

A valid Outline Disclosure under HMRC’s published criteria must be:

• Complete , covering all heads of fraud across all relevant taxes
• Accurate , the narrative correctly describes the conduct
• Personal , signed by the individual (not just the adviser)
• Timely , submitted within 60 days of the letter
• Compliant in form , using HMRC’s prescribed Outline Disclosure template

An Outline that fails any of these tests can be rejected by HMRC, treated as a denial and remove the route to immunity.

“All heads of fraud, all years”

This is the single most important rule in CDF practice. The Outline must capture every category of deliberate behaviour that has led to a loss of tax, across every tax and every year, not just the matter HMRC has flagged in its letter.

HMRC’s letter may reference a single area (for example, an unreported foreign bank account). The CDF immunity, however, requires you to disclose any other deliberate tax loss as well, the suppressed cash, the personal expenses through the company, the inflated CIS deductions, the gifted assets removed from the IHT estate. Anything not disclosed is outside the immunity and if discovered later will void the protection over the rest.

Scope decisions, the strategic core

Determining what to include in the Outline is the single most strategic decision in a COP9. It involves judgment on:

• Borderline behaviour. Was a particular treatment careless or deliberate? Were personal expenses run through the company a conscious choice or sloppy bookkeeping? Where the honest answer is unclear, the safe answer is to disclose, see our guide to deliberate behaviour.
• Old years. Conduct that predates HMRC’s 20-year window is not strictly disclosable, but ignoring it can undermine the narrative.
• Third parties. Where conduct involved spouses, business partners or family members, whether and how to disclose their involvement is a delicate exercise, their position must be considered separately.
• Entity boundaries. Conduct affecting a company is disclosed by the company; conduct affecting the individual is disclosed by the individual. Both may need to make CDF disclosures.

Scope work is normally led by the specialist adviser in a structured pre-acceptance review. It is the work that pays for itself many times over.

The Disclosure Report

Once the Outline is accepted and the CDF is in force, work begins on the Disclosure Report. This is the substantive forensic document, commonly 50–200 pages including appendices, that quantifies the tax loss in detail.

A typical Disclosure Report contains:

• A narrative explanation of how each head of fraud arose, the period covered and who was responsible
• A year-by-year, tax-by-tax computation of the additional tax due
• Supporting workings, source documents and reconciliations
• An interest computation
• A penalty model with the proposed behaviour categorisation, disclosure quality reductions and the recommended penalty percentage
• A statement of personal assets (where HMRC has asked for one) and a statement of means if time-to-pay is required
• The signed Statement of Truth

Third-party verification

HMRC reserves the right to verify the Disclosure Report against third-party sources. In practice this can include direct enquiries to banks, business counterparties, agents, tenants, exchanges and overseas tax authorities. Inconsistencies discovered through verification are taken seriously and are often the trigger for an immunity challenge.

The Statement of Truth

The Disclosure Report concludes with a Statement of Truth signed personally by the taxpayer (and any other party making disclosure). The Statement confirms that the disclosure is complete and accurate to the best of the signatory’s knowledge and belief. Knowingly false statements of truth attract serious consequences, including criminal exposure independent of the underlying tax matter.

Payment terms and time-to-pay

Settlement is normally by lump sum, but HMRC routinely agrees structured payment arrangements where the lump sum is unaffordable. A typical time-to-pay (TTP) arrangement in a COP9 settlement runs 12 to 60 months, supported by a statement of means demonstrating the proposed instalment is the maximum the taxpayer can sustain.

Important practical points on TTP:

• Interest continues to accrue on the outstanding balance throughout the TTP period
• HMRC may ask for security over assets in higher-value cases
• Default on instalments accelerates the full balance and can be treated as a breach of the cooperation requirement
• An early lump sum from refinancing or asset sale is normally welcomed and may attract no penalty consequence

Model the rough penalty range and tax-plus-interest sums on our penalty calculator before the settlement meeting.

What voids the immunity

The contract is conditional. HMRC can rescind the immunity where:

• Material conduct was omitted from the Outline Disclosure or Disclosure Report
• The disclosure contains knowingly false statements
• The taxpayer refuses to cooperate with reasonable HMRC requests
• The Statement of Truth is shown to have been signed without honest belief in its contents
• The taxpayer engages in further deliberate conduct during the enquiry (e.g. moving assets to frustrate collection)

Where the immunity is voided, HMRC is free to refer the matter to Criminal Investigation. The voiding is rare in well-handled cases, common in cases where the taxpayer attempted self-representation or partial disclosure.

The Settlement Letter

The case concludes with a Settlement Letter (sometimes called a Letter of Offer and Acceptance). This is the formal close-out: the taxpayer offers a stated sum in full and final settlement of tax, interest and penalty for the disclosed periods; HMRC accepts; the matter is closed and the disclosed periods cannot be reopened absent evidence of further undisclosed deliberate conduct.

The Settlement Letter is the legal close to the procedure. Once signed and the funds paid (or the TTP commenced), the contract has been performed on both sides.

Realistic timeline

• Days 1–60: Instruct specialist, scoping review, Outline Disclosure submitted, Acceptance Letter signed
• Months 2–4: Opening meeting; records assembly; methodology agreement
• Months 4–10: Drafting the Disclosure Report
• Months 10–14: HMRC review of Report; iterative information requests; third-party verification
• Months 14–17: Penalty negotiation
• Months 17–18: Settlement Letter, payment or TTP arrangement

Common scope errors we see

• Disclosing only the matter HMRC referenced (the “respond to the letter” mistake)
• Excluding minor heads of fraud on the basis they are “not worth mentioning”
• Omitting connected entities (the personal company, the partnership, the trust)
• Treating careless behaviour as deliberate without basis, inflating exposure
• Treating deliberate behaviour as careless without basis, inviting an immunity challenge
• Failing to consider IHT, SDLT or NIC exposure alongside the income tax / corporation tax core
• Underestimating the number of years in scope under the 20-year rule

For the “first 7 days” perspective on early steps, see our letter-received guide. For how COP9 differs from its civil cousin, see COP9 vs COP8.

Frequently asked questions

Related guides

• Code of Practice 9: the complete UK guide
• Received a COP9 letter? The first 7 days
• COP9 vs COP8
• “Deliberate behaviour”: what HMRC actually means
• HMRC penalty calculator