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Code of Practice 9 (COP 9) is a procedure being used by HMRC with increasing regularity. In this article we answer the most frequently asked questions regarding Code of Practice 9; together with an information and action guide should you become subject to the Code of Practice 9 process.

We are seeing increasing instances of COP 9 being recommended as the best disclosure option; by advisers who may have ulterior motives. Many directing their clients to use the Contractual Disclosure facility to report fraud to HMRC; when there are much more sensible and practical alternatives. We can only imagine that this is fee driven; because of the sheer amount of professional time a report under the COP 9 process takes.

You should always approach a tax investigation specialist before deciding whether or not the Contractual Disclosure Facility is best for you and your particular circumstances. Remember, by using the Contractual Disclosure Facility and Code of Practice 9 process; you are in effect putting HMRC on notice that you have committed serious tax fraud. There are other disclosure options available.

What are the implications of using the Code of Practice 9 process?

Code of Practice 9 is the most serious civil process available to HMRC. It is one step away from a criminal prosecution. Consequently, the use of COP 9 needs to be considered very carefully. If you are reading this article, then you will be facing one of two scenarios:

  • HMRC have written to you offering you the opportunity to take part in the Contractual Disclosure Facility; under the Code of Practice 9 procedures.
  • You are considering making a voluntary disclosure of tax irregularities to HMRC using the Contractual Disclosure Facility under Code of Practice 9

If HMRC have written to you under Code of Practice 9; then the process has already begun. It will rarely, if ever be changed to a lower level form of compliance intervention. HMRC will only ever commence proceedings under Code of Practice 9 where they believe that there is clear evidence that a serious tax fraud or evasion has been committed.

HMRC will offer the CDF as a formal contract; whereby you disclose all irregularities to them in return for immunity from prosecution.

Individuals or corporate entities can also come forward voluntarily and request that HMRC accept a full disclosure of all tax irregularities via the CDF. As suggested above; please do consider your options carefully before voluntarily choosing the CDF as your best disclosure option. Always seek specialist tax investigation advice first.

What does the use of COP 9 process mean in practice?

If HMRC write to you instigating proceedings under COP 9;

You have 60 days to respond to HMRC’s opening letter. You are offered the opportunity to enter into a contract via the CDF. You then have two choices:

  • Accept the offer
  • Decline the offer

If you choose to accept the offer. HMRC will first ask you to outline the nature of the irregularities; before inviting you to an opening meeting. During that meeting HMRC will likely ask you to commission a full report disclosing any fraud or evasion you have been guilty of within the last 20 years.

If you decline the offer; HMRC will likely launch their own investigation into your tax affairs for the last 20 years. In such circumstances the chances of HMRC launching a criminal prosecution dramatically increase.

Please take some time to read the following pages which contain more detailed information:

  • Code of Practice 9
  • Contractual Disclosure Facility
  • Fraud Investigation Service
  • HMRC Criminal Prosecutions

How will HMRC investigate me under Code of Practice 9?

An investigation under Code of Practice 9 will the most intrusive and far reaching of any procedure available to HMRC using the civil powers.

HMRC have a wealth of third-party information sources available to them; both inside and outside of the public domain. HMRC can obtain information from:

  • Banks, building societies and other financial institutions
  • Business customers and suppliers
  • HMRC internal systems
  • The internet and social media
  • Local authorities
  • Solicitors not protected by privilege
  • Trade associations
  • The DVLA
  • Land Registry

The list is almost endless.

A history of Code of Practice 9

Prior to 31 January 2012, cases of suspected serious tax fraud were dealt with by Civil Investigation of Fraud and Specialist tax investigation teams within HMRC.

Cases were and still are dealt with under a procedure detailed at Code of Practice 9. Code of practice 9 is a civil procedure that provides immunity from prosecution; should the taxpayer make a full disclosure of all tax irregularities over a specified period. process by specialist offices of HMRC.

SO WHAT is DIFFERENT ABOUT THE CDF?

The Contractual Disclosure facility is simply a contract between the taxpayer or entity under investigation; using the procedures outlined under Code of Practice 9.

If you enter into this contract with HMRC and cooperate fully; disclosing all tax irregularities, as part of a commissioned report HMRC will agree not to prosecute you for any f the tax offences committed.

Should you decline the opportunity to take part in the CDF or fail to disclose all irregularities to HMRC this will be viewed as non-cooperation. In such circumstances HMRC will launch their own investigation of your tax affairs, which could result in a criminal prosecution.

Code of Practice 9 tax investigations are conducted by the most senior investigators within HMRC. The process is intrusive, time intensive and certainly not a time for half measures. Your COP 9 disclosure needs to be right first time. Specialist advice is essential.

WHAT INFORMATION AND DOCUMENTS DO I NEED TO INCLUDE IN COP9 REPORT?

Firstly, you need to disclose all tax irregularities to HMRC. This will include a comprehensive narrative, financial accounts, tax computations and bank analysis covering agreed period.

Wherever possible, your COP 9 report should include supporting evidence; including invoices and receipts.  report will need to contain documentary evidence in support of its findings. You will also need to include a number of forms and certified statements including;

  • a certificate of bank, building society and credit cards operated
  • a statement of assets and liabilities
  • a certificate of full disclosure

HMRC will review and test areas of the report to ensure that a full disclosure has been made. If your COP 9 disclosure is accepted then HMRC will seek to agree a financial settlement with you including tax, interest and penalties.

Any lack of co-operation during the COP 9 process will likely have a detrimental effect on the level of penalties that HMRC seek to charge. HMRC also reserve the right to publish the names of the deliberate defaulters on their website.

There is one constant repeated throughout this guide to the Contractual Disclosure Facility and COP 9. Get yourself experienced, specialist advice immediately. Mistakes could prove to be extremely costly.