Code of Practice 9 Frequently Asked Questions

What is Code of Practice 9?

Code of Practice 9, often referred to as COP 9 is the most serious civil tax investigation procedure available to HMRC. It is effectively one step below a criminal investigation. Code of Practice 9 is a process reserved for the most grievous forms of tax evasion and will only be used by HMRC in cases where the department suspects a serious loss of tax through deliberate fraudulent activity.

What is HMRC’s intention when they begin a COP 9 investigation?

Code of Practice 9 is a civil tax investigation procedure. HMRC clearly suspect that serious tax evasion has taken place and that this action has been taken deliberately. However; a key element of COP 9 is the non-prosecution promise. Should you comply; then it is highly likely that HMRC will reach a financial settlement with you. That is their intention at the beginning of the process and that will remain the case if you are truthful and cooperative.

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How does a COP 9 investigation begin?

Firstly; it would be explaining the level of pre investigation intelligence building undertaken by HMRC before using Code of Practice 9. Tax investigations are very resource intensive and expensive; even if conducted at a lower level via Local Compliance. These costs increase markedly when HMRC are investigating more serious tax fraud under COP 9. HMRC will begin by writing to you formally. Their initial letter sets the tone quickly stating that “HMRC have information that gives us reason to suspect that you have committed tax fraud”.

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Why is the COP 9 procedure so serious and expensive?

Code of Practice 9 is the most serious civil legislation available to HMRC. Because the department suspect that a deliberate tax fraud has taken place; they have it with their power to use the discovery provisions outlined at Section 29 TMA 1970. This means that disclosures submitted under COP 9 will often go back as far as 20 years. All COP 9 investigations opened by HMRC and are conducted by elite investigation offices.

All HMRC officers who undertake COP9 tax investigations have specialist fraud training. All these factors combined should give you a clear indication of just how seriously HMRC view your suspected conduct. You can read more about the HMRC offices who undertake COP 9 work by visiting the link below:

Fraud Investigation Service

What is the Contractual Disclosure Facility?

When HMRC write to you at the opening of a COP 9 tax investigation, their letter will include an offer to take part in the Contractual Disclosure Facility. The CDF gives you the opportunity to disclose any loss of tax to HMRC that has been brought about by your deliberate conduct. You have 60 days to either to accept or reject the offer. You can read more detailed information on the Contractual Disclosure Facility by clicking on the link below:

Contractual Disclosure Facility

Should I accept the offer to take part in the CDF?

Your decision to accept the offer needs to be considered carefully and with advice and support from a tax investigation specialist. You should remember that your acceptance to take part in the CDF process is in effect an admission that you have committed deliberate tax fraud. Your chosen COP 9 investigation specialist will be able to offer you the appropriate advice on how to proceed.

The distinction between careless, non-deliberate and deliberate behaviour can be complicated so you should never enter the CDF/COP 9 process without professional help and support.

What are the benefits of accepting the offer to take part in the CDF?

The obvious benefit of acceptance; should you accept that you are guilty of deliberate tax evasion is that you will receive immunity from a potential criminal prosecution. However, a condition of entering the CDF is that you may a full disclosure of all omissions, irregularities or errors over a specified period. You will face higher penalties because of admitting deliberate behaviour and therefore the scope of your disclosure could encompass up to 20 years if appropriate.

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What happens if I accept the CDF offer?

If you accept the offer to take part in the CDF; HMRC will immediately note that you have admitted to committing deliberate tax fraud. You will be expected to outline this behaviour; together with a summary of all non-deliberate conduct as part of an initial outline disclosure. The forms required to complete your outline disclosure will accompany the initial COP 9 letter. You have 60 days from the date of the opening COP 9 letter to return the outline to HMRC. If you miss this deadline HMRC will treat your case as a rejection and open their own investigation.

What happens after HMRC receive my outline disclosure?

Once HMRC receive your outline disclosure; they will review the content against the information they hold. All COP 9 interventions will be preceded will a comprehensive interrogation of all intelligence sources available to HMRC. The level, scale and quality of this work should not be underestimated. All of that said; it is not always the case that HMRC hold accurate or robust information.

All you need remember when filing any disclosure is to tell the truth to the best of your knowledge and belief. If HMRC accept your outline disclosure they will request an opening meeting; with a view to commissioning a full report. The report; spanning up to 20 years will be prepared by your chosen adviser; with the focus being the deliberate behaviour identified in the outline disclosure.

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What happens at a COP 9 opening meeting?

HMRC meetings can be stressful affairs at the best of times. Am opening COP 9 meeting will likely be the most intense and stressful meeting you ever attend. You must not attend a COP 9 meeting without professional representation. Preferably from a tax investigation specialist with specific COP 9 experience.  The meeting is your opportunity to discuss and disclose any deliberate irregularities to HMRC. You can read more about the COP 9 process and meetings with HMRC by visiting the links below.

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What happens after the opening COP 9 meeting?

Your adviser will commission a report; detailing all tax irregularities over an agreed, specified period. This can be up to 20 years. Preparing the disclosure report can be a lengthy procedure; so HMRC will request several follow up meetings to assess and measure progress. It is vital that your adviser communicates effectively with HMRC throughout the COP 9 process.

If HMRC are not satisfied that the CDF provisions are being met or are likely to be met they can withdraw the offer of taking part at any time. You will then find yourself subject to an HMRC investigation and possible criminal proceedings.

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What happens if HMRC accept my disclosure?

Once your report has been received HMRC will check it against the information they hold. If they accept your disclosure as complete; they will agree tax settlement with your adviser. This is otherwise known as a contract settlement; encompassing the total tax liabilities; plus interest and a tax geared penalty based upon the factors outlined in HMRC’s policy on penalties.

A badly prepared or managed disclosure will result in heavier penalties and a possible criminal investigation. You can read more about HMRC penalties and HMRC’s criminal prosecution policy by following the links below:

HMRC penalties

HMRC’s criminal prosecution policy

What happens if I reject the CDF offer?

If you reject HMRC’s offer to take part in the CDF they will almost inevitably start their own detailed investigation. This could lead to the commencement of criminal proceedings. Should you feel that you have not committed any form of deliberate tax evasion; the you must discuss this with your adviser well before rejecting the offer. Mistakes can be very costly.

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What happens if I do not reply to HMRC?

If you do not reply to HMRC; they will treat you as being non cooperative and start a detailed investigation of your tax affairs. In more serious cases this can lead to a criminal prosecution. Even if HMRC do not pursue a criminal investigation any financial penalties levied via the civil process will be very much higher than if a disclosure is made.

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Why do I need specialist professional representation?

Firstly, it is pertinent to highlight HMRC’s own view on Code of Practice 9. HMRC’s published guidance is:

“You are strongly recommended to seek specialist independent professional advice…many people find it helpful to appoint a specialist adviser who is familiar with the Code of Practice, in addition to their regular advisor.”

Throughout this article we have emphasised the importance of specialist advice and decision making. It is key at every stage of the COP 9 process. Mistakes born out of poor decision making or lack of knowledge can be incredibly costly and potentially see you in front of a court.

Code of Practice 9 is a very complex area and the work undertaken in guiding you through this procedure should not be underestimated. You simply must get yourself specialist advice from a firm with dedicated COP experience.

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Will I go to prison?

If a full and accurate disclosure is made; then the straightforward answer in “no”.

However, should you decide not to cooperate with HMRC or make materially false statements during the COP 9 process then you may well find yourself under criminal investigation.

Tax evasion has been at the forefront of media coverage in recent years and it is viewed dimly in the court of public opinion. This has seen a sea change in the political climate and a reinforcement of HMRC’s already aggressive compliance approach. Huge resources are now devoted to HMRC’s various investigative arms. This is only going to increase in the post Covid-19 era.

Should I make a voluntary disclosure through CDF?

You can make a voluntary disclosure via the CDF process; but before doing so please do seek specialist advice. Admitting to serious, deliberate tax fraud is not something you should do lightly. We are coming across increasing instances of errant advice being given in this area; including guidance from specialists in the so called “big 4” accountancy firms.

This advice is often driven by a selfish, commercially based motive; because disclosures made via CDF / COP 9 always result in bigger fees. There are other voluntary disclosure facilities available to you. Please do give us a call before deciding upon which approach is best for you.

Why should I choose Admiral Tax?

When you deal with Admiral Tax you will deal with one former HMRC tax investigation specialist. Dominic Kiernan is our Director of Investigations. He is the man who answers the phone. He will be your dedicated adviser available to you 7 days a week.

He is the man who will manage your disclosure at all stages through to settlement. You will not find a partner in a large firm here. A person who is there simply to sign you up and take your money; only to pass your case on to a junior member of their team. Admiral offer absolute clarity and accountability from day one.

You can read more about Dominic’s experience by clicking on his personal profile or by visiting his LinkedIn page.

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