If you receive a Code of Practice 9 (COP9) letter, it’s essential to seek independent specialist advice. In fact, in the Code of Practice 9 booklet, HMRC recommends that a specialist adviser is instructed. That way, you can ensure that you make the right decisions from the beginning.
Our dedicated tax dispute resolution team specialises in Code of Practice 9 enquiries. We can either represent you throughout the investigation, or work alongside your current adviser to provide specialist advice when required.
What is Code of Practice 9 (COP9)?
COP9, or Code of Practice 9, is a serious UK tax investigation by HMRC targeting suspected deliberate tax evasion. It involves the Contractual Disclosure Facility (CDF), offering individuals a chance to disclose their tax fraud and avoid criminal prosecution, though significant financial penalties will still apply. Essentially, it’s HMRC’s route for addressing severe tax fraud by encouraging voluntary disclosure, offering a path to settle liabilities without facing criminal charges, but expert legal and tax advice is crucial if involved.
In cases of suspected tax evasion, HMRC’s Fraud Investigations Service (FIS) conducts the investigation on either a civil or criminal level. If they decide not to pursue the investigation as a criminal case, they can opt to still investigate under the Code of Practice 9 procedure.
Ultimately, where HMRC start an investigation under Code of Practice 9, the aim is to reach a civil settlement to recover the unpaid tax, interest and penalties.
What happens during a Code of Practice 9 (COP9) investigation?
A COP9 investigation is launched by HMRC when they suspect serious tax fraud. It provides an opportunity for the taxpayer to disclose irregularities under the Contractual Disclosure Facility (CDF). A COP9 can be triggered by a variety of factors, including:
- Underreporting income, such as hiding business earnings
- Inflating expenses to reduce taxable profit
- Failure to declare offshore assets or income
- Using false invoices or sham transactions to manipulate tax liabilities
Rather than immediately pursuing criminal prosecution, HMRC offers the taxpayer an opportunity to disclose tax fraud voluntarily.
Dealing with HMRC’s procedures
If you’re being investigated under Code of Practice 9, HMRC will write to you offering you the opportunity to make a full and accurate disclosure under the terms of the Contractual Disclosure Facility (CDF). You’ll have 60 days to decide whether to accept or reject the offer.
Along with the opening letter, HMRC also provides the Code of Practice 9 booklet, which sets out how the investigation is conducted and what is required, as well as a form to make an outline disclosure, if you accept that you acted deliberately.
Next steps after receiving COP9 letter
We’ll work with you to identify probable areas of concern and advise you on whether to accept or reject the CDF offer. We recommend that you decide whether to accept or reject as soon as possible to ensure you meet the 60-day deadline — though in exceptional circumstances, HMRC may be prepared to provide more time.
Potential outcomes
Make a full and accurate disclosure
If you accept that tax was evaded, considerable care should be taken to disclose all the relevant issues. HMRC does not generally elevate cases for criminal investigation where a complete and correct disclosure is made.
HMRC will request that you sign a statement saying you deliberately evaded tax and provide an outline disclosure of what happened, who was involved and when the problem first started. You’ll also be asked to provide details of any other unpaid taxes.
Making payments under the Contract Disclosure Facility
Facing a COP9 investigation means HMRC anticipates immediate and ongoing payments towards your potential tax liability. These “payments on account” are vital; neglecting them signals a lack of cooperation. Proactively paying can also lessen the sting of accumulating late payment interest. If you foresee needing to spread payments over time, perhaps to liquidate assets, early and transparent communication with HMRC is key to managing their expectations.
HMRC request for a meeting
Once your response is submitted, we can meet with HMRC to discuss their principal concerns. Usually, you’ll be invited to attend the meeting. HMRC often infers that not attending the meeting will affect the level of cooperation and tax-geared penalties that are applied to the tax paid late. In reality, there is no statutory obligation for you to attend, though it could help expedite matters.
While there is no statutory obligation to attend, the meetings held within a COP9 investigation are a critical part of the process. From a practical perspective, attending these meetings, with proper professional representation is highly advisable. It allows for better control of the situation and it demonstrates the level of cooperation that HMRC expects.
What happens if you fail to cooperate with the HMRC?
Rejecting the CDF and not cooperating with the HMRC can result in negative outcomes, including:
- Criminal prosecution: HMRC may pursue criminal charges, leading to potential imprisonment and substantial fines.
- Higher penalties: Non-cooperation can result in significantly higher financial penalties.
- Asset seizure: HMRC has the power to seize assets and freeze bank accounts.
- Publicity: In high-profile cases, HMRC may publicise the investigation, causing severe reputational damage
In essence, a COP9 investigation is a serious matter with potentially significant consequences. The decision to cooperate or not is a critical one that should be made with careful consideration and professional advice.
If you’d like to talk to us about a Code of Practice 9 (COP9) investigation, don’t hesitate to get in touch with team lead, John Hood.
