What is Code of Practice 9 (COP9)?
Investigation of suspected tax fraud
If HMRC suspect that you have committed serious tax fraud; they will normally make contact with you in writing. These cases are all conducted by HMRC’s Fraud Investigation Service and will be headed Investigation of Suspected Tax Fraud. HMRC will open by telling you that they suspect you have committed tax fraud; enclosing a copy of Code of Practice 9.
The use of Code of Practice 9 is reserved for cases only where HMRC suspects that there has been a significant loss of tax. HMRC will only ever use this procedure; should they suspect a serious loss of tax, due to deliberate fraudulent behaviour.
Under COP 9; as part of a contractual arrangement called the CDF (Contractual Disclosure Facility), HMRC will offer you the opportunity of all tax losses brought about by your deliberate behaviour. The CDF will not apply to any tax offences or irregularities that you do not disclose.
This is very much at the sharp end of HMRC compliance. You can be assured that the officer dealing with your case will be senior; with specialist fraud and intelligence training. You must not underestimate the gravity of the COP 9 process. Not only is an arrangement under the Contractual Disclosure Facility your best option. It is your only option if you are to avoid criminal prosecution.
Contractual Disclosure Facility
HMRC is offering you; via an officer authorised to carry out tax investigations under Code of Practice 9, the opportunity to make a full disclosure under the CDF. Should you accept the opportunity to take part in the Contractual Disclosure Facility; you will receive immunity from prosecution as long as you:
- Make and admission of deliberate behaviour
- Fully disclose all omissions, errors, and irregularities
Accepting HMRC’s offer to take part in the CDF
You are required to make a decision on whether to accept HMRC’s offer within 60 days. Should you do so you will in the first instance be required to outline the offences which have given rise to a tax loss. It is vital that the outline disclosure is prepared with the help of a tax investigation specialist.
Rejecting the offer to take part in the CDF
In any investigation of suspected tax Fraud, you need to be extremely careful before rejecting any offer to take part in the contractual disclosure facility. If you reject the offer, you are in effect denying that you have committed any form of tax fraud. This is not a time for grey areas or guess work. Please seek advice from a tax investigation specialist before embarking on a course of action you may later regret.
If you reject the offer, HMRC will investigate your tax affairs thoroughly and forensically; using all of the information powers at their disposal. It is usually safe to assume that if HMRC instigates an investigation under COP 9 that they have clear evidence that a fraud has been committed. This could eventually lead to a criminal investigation.
Why you need representation in an Investigation of Suspected Tax Fraud?
Any investigation of suspected tax fraud under COP 9 is as serious as it gets under HMRC’s civil powers. Their own published guidance states:
“You are strongly recommended to seek specialist independent professional advice Many people find it helpful to appoint a specialist adviser who is familiar with this Code of Practice, in addition to their regular advisor.”
A tax investigation specialist with experience of the COP 9 process is your only viable option. This is not a time for tax amateurs; however well-intentioned. It is you alone who will pay the price for mistakes. Please do not subject yourself to that level of risk. Particularly as it may end in a prison sentence.
What penalties are involved?
HMRC’s penalty regime is as follows:
- There will be a maximum penalty of 30% of the tax due if the error is careless.
- The penalty will be between 20% and 70% of the tax due if the error is deliberate;
- If the error is deliberate and has been concealed, the penalty will be between 30% and 100% of the tax; and
- Where offshore tax matters are involved, the maximum penalty is 200% of the tax due.