COP9: A more civil way to tackle tax evasion than criminal prosecution?

Where HMRC suspects that tax fraud has been committed there are two routes of investigation – the first being a criminal investigation and the second a civil investigation under the Code of Practice 9 (investigation of fraud procedure). The benefit of the COP9 procedure to the accused is that HMRC will not seek to pursue a criminal investigation if full disclosure of the deliberate conduct is made.

What is ‘deliberate conduct’?

HMRC uses this term to describe conduct that a person either

-knew that an entry (or entries) in a tax return and/or accounts were wrong and submitted them anyway
-knew that a liability to tax existed but chose not to tell HMRC at the correct time

The act or omission must be a deliberate one – the COP9 procedure is not used to disclose careless errors or mistakes.

What is the COP9 procedure?

Under COP9 HMRC offer a person the chance to make full disclosure under a contractual arrangement called the ‘Contractual Disclosure Facility’ (‘CDF’). HMRC will send a letter offering the CDF to which the recipient has 60 days to respond, confirming whether or not they are willing to engage in the COP9 procedure. The 60 days runs from the day after the CDF offer letter is received.

If I have received a CDF offer letter what disclosure do I need to make?

The CDF Offer letter requires you (within 60 days) to return the following documents:

-sign and return the CDF Contract confirming that you wish to make a disclosure of your deliberate behaviour under the COP9 procedure

-complete the Outline Disclosure form. This form requires you to give information about the deliberate behaviour to include what you did, how you did it, over what period and how you benefitted. You will also be expected to provide information about the involvement of any other people or entities.

It is a fundamental requirement of the COP9 procedure that the Outline Disclosure is full and details all the type of deliberate behaviours that have resulted in a loss of tax revenue. The period of time over which full disclosure needs to be made is one of 20 years.

Upon receipt of the Outline Disclosure HMRC will assess that document for completeness. If HMRC believe that the Outline Disclosure is incomplete then the COP9 procedure may be withdrawn and a criminal investigation begun.

Where HMRC are satisfied that a valid Outline Disclosure has been made then the procedure moves to the Formal Disclosure stage.

What is the Formal Disclosure stage?

HMRC will decide whether further details of the deliberate behaviour is required and in more complex cases you may need to arrange for a Disclosure Report (usually by a tax adviser) to be prepared and served. You may also be invited to attend an interview with HMRC investigators to explain more fully about your deliberate behaviour.

What sanction will I be subjected to?

The fundamental appeal of the COP9 procedure is that the threat of criminal proceedings is avoided (where full disclosure is made). At the conclusion of the COP9 procedure a sum will be calculated as to the penalty you will need to pay – your conduct in providing full disclosure is an important aspect of this calculation.

Can I request the COP9 procedure?

A person can make a formal request to HMRC to be offered the COP9 procedure. The additional benefit in requesting the COP9 procedure is the credibility that it affords a person which can impact upon the level of sanction at the end of the investigation.

How can Brett Wilson assist?

We are experienced in COP9 investigations and work closely with tax advisers where the need arises. As we are also criminal law practitioners, we are able to provide insight into the risk of a potential criminal investigation should the COP9 procedure not be accepted.

If you would like to discuss the COP9 procedure or a pending criminal tax investigation please email or telephone Sharron Boyce (020 7183 8950) or a member of her team.

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