Code Of Practice 9 (COP9) Tax Investigations - FAQ.

Have you or your client received an HMRC Code of Practice 9 letter? Here, our award winning tax disputes team answer frequently asked questions about Code of Practice 9 and the Contractual Disclosure Facility, sharing how they can manage the process and help minimise penalties.
Get help with HMRC COP9 and CDF today: +44 (0)20 7710 3389
What is Code of Practice 9?

What is Code of Practice 9?

Code of Practice 9, also known as COP9, is a tax investigation that is only opened if HMRC suspects a serious loss of tax through the fraudulent activity of a taxpayer. Consequently, the initial letter HMRC issues opens with “HMRC have information that gives us reason to suspect that you have committed tax fraud.”

They are the most serious type of civil investigation undertaken by HMRC and are conducted by its elite investigation offices. All HMRC officers who undertake COP9 tax investigations are specialist fraud-trained investigators and should not be underestimated.

What is the Contractual Disclosure Facility?

What is the Contractual Disclosure Facility?

At the opening of a COP9 tax investigation, you are issued with the Contractual Disclosure Facility offer, otherwise known as CDF. The CDF offer gives you the chance to disclose any loss of tax to HMRC that has been brought about by your deliberate conduct and gives you 60 days to accept or reject the offer. 

Should I accept the CDF offer?

If you accept, you will receive immunity from criminal investigation and/or prosecution in return for an admission of deliberate behaviour and full disclosure of all omissions, errors or irregularities. However, by accepting the offer, you are admitting to having committed fraud and, consequently, this will lead to much higher financial penalties than in less serious inaccuracy cases. As such, you need to be sure that you have in fact acted deliberately under HMRC’s behaviour guidelines. Just because HMRC has started a COP9 investigation and issued a CDF does not mean you should or have to accept in a non-deliberate irregularity case. The distinction between deliberate, non-deliberate and careless can be complex and we would always advise seeking professional advice prior to making a decision.

What happens if I accept the CDF offer?

Accepting the offer will set the CDF process in motion. This will likely entail multiple meetings with HMRC (especially if you do not have representation) and will end with the submission of a full report on your tax affairs, covering up to 20 years, focusing specifically on your deliberate behaviour. HMRC will then review the report and either accept or raise queries. Once HMRC accepts the disclosure as complete, penalties will be levied. Representations can then be made as to why the penalties should be reduced.

It is important to note that, should the disclosure be managed badly, it can lead to higher penalties and possibly still result in a criminal investigation and/or prosecution given HMRC has the right to withdraw immunity under certain circumstances.

Should I reject the CDF offer?

You should only reject the CDF offer, and deny tax fraud, if you genuinely believe that you have not deliberately filed an inaccurate return or deliberately failed to file a return altogether. Determining whether something has been done deliberately or carelessly is not always as simple as it sounds. Given the seriousness of the decision, and the potential ramifications (discussed below), it is essential that you obtain specialist advice to assist you in your decision.

What happens if I reject the CDF offer?

HMRC will either start a more detailed investigation or accept your rejection issuing a confirmation that it no longer suspects you of fraud. However, in case where a disclosure is required for non-deliberate irregularities and a full disclosure is not made, HMRC will almost certainly pursue their own investigation. What constitutes a full disclosure will depend on relevant time limits.

If HMRC still believes a disclosure of deliberate irregularities should have been made with an acceptance of the CDF offer, HMRC may commence a criminal investigation with a view to prosecution.

What happens if I do nothing?

If HMRC receives neither acceptance nor rejection, they will continue to investigate your tax affairs, which could lead to criminal prosecution. Even if HMRC does not pursue such a prosecution, any penalties they levy under the civil regime will be much higher due to the failure to cooperate.

Do I need specialist professional representation?

Do I need specialist professional representation?

At the outset of a COP9 tax investigation, HMRC will not share or divulge the evidence it holds that supports its suspicion of fraud. This makes it difficult for non-specialist agents to advise their clients as to whether they should accept or reject the CDF offer. Therefore, specialist advice about the potential consequences of accepting or rejecting the CDF offer is imperative. Furthermore, HMRC will also require a meeting with you and without adequate representation, these can become confrontational and extremely stressful. 

Should you be placed under COP9 tax investigation, HMRC’s published view is as follows:“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.”

Specialist advisers, who have been provided with full details of your affairs, can guide you around potential pitfalls to ensure you are best protected. They will also allow you to get ahead of any accusations by HMRC and should reduce the overall cost of any investigation.

Can I go to prison?

Can I go to prison?

As a result of the current political climate, HMRC is under pressure to increase the number of criminal prosecutions it undertakes and its use of its ‘naming and shaming’ powers. Tax fraud is a serious crime and does carry the potential for a custodial sentence. 

That being said, one of the benefits of accepting the CDF offer for deliberate irregularities is that HMRC guarantees immunity from prosecution, provided a full and accurate disclosure is made. Engaging specialist advisers is the first step to ensure criminal prosecution, and the threat of prison time, is avoided.

What penalties are involved?

What penalties are involved?

HMRC says people who take reasonable care when completing their returns will not be penalised, but that careless or deliberate irregularities will attract penalties. These penalties will be levied as a percentage of the unpaid tax and will vary according to the culpability of the taxpayer and the degree of their cooperation.

Our expertise ensures that penalties are considered from the outset, allowing us to work towards the lowest penalty that can reasonably be applied. Penalties for careless irregularities can be suspended.

Can I make a voluntary disclosure through CDF?

The COP9 CDF process can be used where a taxpayer wishes to voluntarily disclose a tax fraud. We regularly adopt this approach for any client who accepts they deliberately and falsely understated their tax. This secures immunity from prosecutions in return for their making a full disclosure. If this is something that applies to your circumstances, we strongly recommend you seek expert advice before contacting HMRC.

How can we help?

How can we help?

Should you choose to get specialist advice from Buzzacott, we will:

  • Carry out a comprehensive review of your tax affairs, working with you and your professional adviser, to ensure we have a full understanding of the issues and risks you are facing;
  • Prepare a strategy going forward to minimise your potential exposure to unnecessary tax, interest and penalties;
  • Should a disclosure be necessary, we will present this to HMRC to ensure that you are treated fairly and proportionately; and
  • Aim to fast track your COP9 investigation to resolution and closure of all issues to your satisfaction at minimum cost and disruption to you.

Awarded Best Tax Disputes/Investigations Team

Buzzacott’s Tax Investigations and Dispute Resolution team has been honoured as the ‘Best Tax Disputes/Investigations Team’ at the prestigious Tolley’s Taxation Awards 2019. These awards recognise the finest achievements and talents of remarkable individuals and teams across the entire tax profession.

We can guide you through the COP9 and CDF process and act as your representative and agent, ensuring you have minimum contact with HMRC and safeguarding your best interests.

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