Question 1

What is Code of Practice 9 (CoP9)?

Accepted Answer

HM Revenue and Custom’s (HMRC) Code of Practice 9 (COP9) is the basis of the Contractual Disclosure Facility. (CDF) The CDF is HMRC’s most powerful weapon short of prosecution. The good news for a taxpayer is that if they are selected for the COP9 process, it is a clear indication that HMRC does not intend or desire to prosecute them.

If you have been notified by HMRC that you are under suspicion of serious tax fraud and are considering the Code of Practice 9, it’s vital to act straight away. It is also vital that you get advice from a tax investigation specialist, HMRC themselves recommend taxpayers seek specialist advice. Contact one of our specialist advisors, in full confidence, now.

Question 2

How does COP9 work?

Accepted Answer

HMRC will write to a taxpayer advising that they are suspected of serious tax fraud and provide them a Code of Practice 9 booklet which explains how the CDF works. It will also provide the initial paperwork to allow the taxpayer to decide if taking part in the Code of Practice 9 process is right for them. Anyone receiving such a letter from HMRC should seek specialist advice at this early stage to ensure they know the implications of the contract HMRC is offering. In our experience it is best to get specialist advice rather than simply rely on your current advisor given the significance of CoP9.

At this point HMRC will not reveal what it believes the taxpayer has been up to; this is to encourage full disclosure rather than a partial admission that HMRC believes a taxpayer might otherwise be tempted to make.

As part of the tax investigation, HMRC may raise formal assessments and tax demands, which unless appealed, will be collected from the taxpayer either by the Debt Management Unit or using other formal powers such as bankruptcy proceedings.

Any lack of co-operation by the taxpayer will adversely affect the level of penalties that can be charged, and in the case of ‘deliberate defaulters’, may result in their names appearing on HMRC’s website under the ‘name and shame’ (Publishing Deliberate Defaulters) regime.

HMRC also has the power to obtain information from many foreign jurisdictions using its exchange of information powers and recent Taxpayer Information Exchange Agreements (TIEAs).

As part of the tax investigation, HMRC may raise formal assessments and tax demands, which unless appealed, will be collected from the taxpayer either by the Debt Management Unit or using other formal powers such as bankruptcy proceedings.

Any lack of co-operation by the taxpayer will adversely affect the level of penalties that can be charged, and in the case of ‘deliberate defaulters’, may result in their names appearing on HMRC’s website under the ‘name and shame’ (Publishing Deliberate Defaulters) regime.

Question 3

What is the history of COP9 TAX INVESTIGATIONS?

Accepted Answer

Prior to 31 January 2012, cases of suspected serious tax fraud were dealt with under the Civil Investigation of Fraud process by specialist offices of HMRC. This process, once started provided an absolute guarantee that the person under investigation would not be prosecuted for the original tax offences.

Over the years, HMRC felt that this process was not always being taken seriously by those under investigation and their advisors and was not being afforded the level of co-operation it deserved. Out of this sense of frustration Code of Practice 9 was born.

Question 4

Who does COP9 apply to?

Accepted Answer

CoP9 is simply a contract between the person under investigation and HMRC. The taxpayer’s side of the bargain is that they offer their full co-operation and undertake to disclose all tax irregularities within an agreed time scale. For HMRC’s part it agrees not to prosecute the original tax offences if the taxpayer adheres to the terms of the CoP9. However, HMRC reserves the right to prosecute if the taxpayer breaches the contract, in other words, fails to disclose all irregularities.

A tax investigation under the Code of Practice 9 process is conducted by what is regarded as HMRC’s elite and specially trained tax fraud investigation teams.

Question 5

Does a taxpayer have to co-operate with HMRC with COP9?

Accepted Answer

No. The client can either accept the invitation to participate in the CoP9 tax investigation confirming that deliberate behaviour has taken place which has brought about a loss of tax, and which HMRC would consider to be fraud, or they can reject the invitation.

This is an extremely important decision to make, and one that should only be taken with specialist advice, particularly as only the first option will guarantee that HMRC will not prosecute.

Question 6

Should I get specialist advice about Code of Practice 9?

Accepted Answer

HMRC’s Code of Practice 9 leaflet specifically suggests that you engage an independent specialist advisor. Even if your current advisor is well versed in the CoP9 or other tax investigations, it is advised to take a step back and look at the case with fresh eyes. This will also help maintain your relationship with your current advisor. InTAX will work in conjunction with your current advisor to ensure you receive the best advice possible.

Code of Practice 9 is a very serious investigation and it is imperative you get the best advice to ensure that the matter proceeds down a civil route and to ensure that financial penalties are kept to a minimum.

Question 7

What is COP9/CDF?

Accepted Answer

COP9, or the CDF, is a process which HMRC uses to investigate suspected tax fraud, where it is not pursuing a criminal investigation. It is effectively a contract between the taxpayer and HMRC. The terms of the contract are that the taxpayer will disclose ALL tax problems and in return HMRC will not seek to prosecute.

Question 8

What are the stages of COP9/CDF?

Accepted Answer

In brief, HMRC will first offer COP9 and ask if it is accepted. If COP9 is accepted, then an ‘outline disclosure’ setting out in brief the issues to be disclosed needs to be sent to HMRC at the same time. If the outline disclosure accords with HMRC’s view of what has gone wrong, HMRC will accept you into COP9.

Question 9

Can I ask for COP9?

Accepted Answer

If you know that you have committed a tax fraud and wish to disclose it to HMRC, you can ask for COP9. We have helped a number of clients to do this in the past. Acceptance into COP9 means that HMRC will not commence a criminal investigation. This certainty around what type of investigation will take place can be valuable.

Question 10

Can a COP9 become a criminal investigation?

Accepted Answer

If you fail to cooperate, or materially mis-represent what has happened, then yes, a COP9 can be escalated to a criminal investigation. COP9 is a bargain made between the parties. If everything is disclosed, then no criminal investigation will take place. If HMRC believes it is being mislead during COP9, or that significant matters are being left out, then it may withdraw COP9.

Question 11

What if I refuse COP9?

Accepted Answer

If you refuse COP9, HMRC may commence a criminal investigation, or it may commence a civil investigation. If you believe you have not committed a taxfraud and have refused COP9, you will probably have to demonstrate that your tax affairs are correct and up to date. A small minority of people offered COP9 have not committed any fraud. We have helped clients in that situation to demonstrate that their affairs are in order, or that any errors in the past were not deliberate.

Question 12

Will I pay a penalty, as well as tax, if I have COP9?

Accepted Answer

For any deliberate errors then yes, a penalty will be payable. The amount depends on the behaviour and level of cooperation, as well as whether the issue is onshore or offshore.

Where we help a client with COP9, we will argue for the lowest possible penalty that can reasonably apply to their situation.

Question 13

What triggers a COP9 investigation?

Accepted Answer

HMRC has access to a vast quantity of data, both from within the UK and also from around the world. It also receives tips from members of the public and may receive reports from banks and similar institutions about suspicious transactions. Sometimes HMRC is referred cases by the police, or other law enforcement agencies.

Where information HMRC holds does not tie up with tax returns received, it may open a COP9 enquiry. Anyone who is under investigation for fraud should assume that HMRC has detailed information about them, their businesses, their financial position and also the people that they are associated with.

Question 14

Should I get specialist advice if I have been offered COP9?

Accepted Answer

Yes. If you have been offered COP9 or the CDF, HMRC’s own guidance suggests you get specialist advice. It is essential that you cooperate, but also prudent to ensure that you protect your own interests. It is also important that you have help distinguishing between any deliberate errors and those that are not deliberate, as this may lower the overall tax and penalties. As a specialist adviser, inTAX is not there to help you hide any issues from HMRC, but rather to present your case in the best possible way. 

We have helped many people with COP9 enquiries and as a team we have decades of experience in doing so.

Question 15

Will HMRC tell me why it has offered COP9?

Accepted Answer

Usually not. Once you have received the offer of COP9 it is up to you to determine whether you have committed a fraud and accept the offer or decline it. Your outline disclosure should include all issues that you are aware of.

When you are accepted into COP9, HMRC may disclose further areas that it has interest in. Sometimes these are aspects that can simply be explained and there is no error and sometimes these are areas where a non-deliberate mistake has been made and this needs to be rectified.

Until you have responded to and are accepted into COP9, HMRC usually discloses no information.

Question 16

What if I am offered COP9 and I have not committed fraud?

Accepted Answer

In some cases, HMRC selects a case for COP9, but no fraud has been committed. This may be because it has misinterpreted data, or some information is missing which explains a situation. This is not particularly common (HMRC usually does a lot of research), but it does happen, and we have helped clients in this situation to show that nothing is wrong.

Question 17

Can COP9 be used to disclose errors offshore, or with property, or with crypto?

Accepted Answer

COP9 can be either issued or asked for in relation to tax on any aspect of your business or personal affairs. However, it can only be used for ‘deliberate’ problems, where a tax fraud has been committed.

HMRC also has other disclosure routes available, including the worldwide disclosure facility (WDF) and the digital disclosure service (DDS). If you have errors that are not particularly serious, perhaps an innocent error, it may be that one of these routes is more appropriate. We would be happy to discuss your issue and then let you know what route is most appropriate.

If you have a tax issue where you have committed a fraud, COP9 may be the best option since it provides protection from a criminal investigation.

Question 18

What is tax fraud or evasion in relation to COP9?

Accepted Answer

From HMRC’s perspective, fraud or evasion is where you have not paid the right amount of tax and have done so deliberately. For example, you may have submitted an inaccurate tax return that left some income off, or claimed expenses that either did not exist, or were not actually for your business. It may be that you have taxable income and have not registered to pay tax, but you knew that you should be paying tax. The important point is that at the time you submitted a return, or failed to notify HMRC that you had started to receive taxable income, you knew that your actions were wrong. If you got something wrong because you misunderstood, or didn’t check properly, that might be ‘careless’, but it would not be fraud.

Some cases are quite obviously clear cut. Some can fall into a grey or subjective area. Tax can be complex, and sometimes when people get things wrong without knowing it, HMRC can erroneously make an allegation of fraud. We have helped many clients assess their past actions and decide whether fraud is the correct categorisation of any past errors.

Question 19

What is the difference between COP9 and COP8?

Accepted Answer

Code of practice 8 (COP8) is used by HMRC to investigate bespoke avoidance and possible fraud. COP8 does not give immunity from prosecution like COP9 and should also be handled very carefully. When HMRC is enquiring under COP8, it may bring all other enquiries that are already ongoing ‘under one roof’. So, if there is an enquiry into you as well as your business, HMRC will bring these into the same team.

It may be that HMRC believes that there is a fraud involved in a complex situation, but does not have sufficient evidence to make that allegation. If a fraud becomes apparent during a COP8 investigation, HMRC may change the investigation to a criminal one, or offer COP9. If you receive an enquiry under COP8, and know that you have committed a fraud, you may consider asking for COP9.

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