What Exactly Is An HMRC Tax COP9 Investigation?
An HMRC Tax COP9 investigation is a process undertaken when tax fraud is suspected and an HMRC criminal investigation has typically not started. HMRC may investigate using what is known as Code Of Practice 9 (“COP9”).
The process enables the taxpayer under suspicion to provide complete and accurate disclosure to HMRC of all tax irregularities as well as how those have come about.
The HMRC Tax Investigation Quid Pro Quo
The structure of the HMRC Tax COP9 investigation process is to offer the taxpayer an incentive to fully cooperate with HMRC and avoid being the subject of a criminal investigation. It is also unsurprisingly an attempt by HMRC to change a taxpayer’s conduct ie. going forward HMRC will expect that their behaviour avoids repetition of the circumstances that gave rise to the HMRC Tax COP9 investigation arising in the first place. A later compliance check should be anticipated if a taxpayer successfully navigates through a COP9 process and settles matters with HMRC so that it is satisfied that there has been no further reoccurrence.
If HMRC suspects that the disclosure is still incomplete after the COP9 process and or unsatisfactory, it reserves the right to commence a criminal investigation and conceivably proceedings that may lead to prosecution.
You may anticipate that for an HMRC Tax COP9 investigation to start in the first place something is likely to have triggered it. It is unlikely that a taxpayer would be targeted randomly by HMRC. It could arise because other taxpayers are also under investigation with whom there had been association and financial dealings.
COP9 Contractual Disclosure Facility
The Contractual Disclosure Facility (“CDF”) is the opportunity provided under COP9, i.e. that within 60 days the taxpayer makes full disclosure about their relevant tax affairs over the suspected loss to the Crown. A failure to respond within the 60 day period will be treated by HMRC as deliberate and in effect a rejection of the offer they are making.
The idea behind the process is for the taxpayer to volunteer the information. If undertaken in good faith this should enable him or her to obtain a more generous reduction to an HMRC Tax penalty than otherwise would be the case if the taxpayer put HMRC to the time and trouble of having to investigate.
It is important to remember that the taxpayer has a duty to come clean to HMRC.
The Procedure Of The COP9 Contractual Disclosure Facility
In order to undertake a Contractual Disclosure Facility, it is necessary to make an Outline Disclosure of conduct that was deliberate in causing a tax loss to the Crown.
A certified statement is required, confirming that the information provided is a complete and accurate disclosure of all tax irregularities, along with details of assets and liabilities, bank accounts details, and credit cards operated.
The CDF process is intended by HMRC to work if a taxpayer wants to cooperate with HRMC to put matters right and is prepared to make full and frank disclosure.
It is concentrated on deliberate error disclosure in exchange for HMRC not pursuing a criminal investigation.
Rejection Of The COP9 Contractual Disclosure Facility
If a taxpayer does not accept that tax losses have been brought about due to their deliberate conduct they are free to issue a rejection of the CDF.
This approach should only be used if there has been no deliberate loss of tax and or a proper and reasonable belief of that position.
