10/11/23

HMRC Investigation | Code of Practice 9 (COP9)

HMRC Investigation | Code of Practice 9 (COP9)
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HMRC may pursue, at its own discretion, an investigation using Code of Practice 9 (‘COP 9’) as an alternative to a criminal prosecution, in circumstances where it is deemed appropriate.

The service of a COP9 letter provides the recipient with the opportunity to make a complete disclosure of all the activity, deliberate or otherwise, that has led to the suspicion of tax irregularities.

Should HMRC thereafter consider that the recipient of the COP9 letter has failed to make full and accurate disclosure, criminal proceedings may then be commenced.

Hamraj Kang of KANGS Solicitors explains the nature of the COP 9 procedure.

The Nature of Tax Fraud | COP9

Tax fraud arises from behaviour which is both deliberate and dishonest but does not encompass accidental error.

A number of criminal offences may be committed, such as:

  • Cheating the Public Revenue, contrary to common law and
  • Fraud under the Fraud Act 2006.

HMRC provides guidance as to conduct regarded as deliberate such as when:

‘a person submits documents to HMRC containing information that they knew was incorrect, and/or they did not tell HMRC at the right time about information that they knew was relevant to a liability to tax or duty, and/or they made a claim for a payment from HMRC to which they knew they were not entitled’.

HMRC needs only prove that the conduct resulted in a potential risk of tax loss as opposed to any real financial loss.

Conduct of a COP 9 Investigation

A COP9 procedure undertaken by HMRC is a civil investigation into suspected fraudulent activity, particularly in relation to Tax Fraud.

  • Under the COP9 procedure, HMRC offers an opportunity to make complete, honest and accurate disclosure by the issue of a Contractual Disclosure Facility (‘CDF’).
  • The recipient of a CDF has sixty days to comply with two disclosure stages commencing with a valid ‘Outline Disclosure’ of the deliberate conduct resulting in a tax loss.
  • This Outline Disclosure is followed by a ‘Certified Statement’ in which it is confirmed that a full, complete and accurate disclosure of all other irregularities has been made accompanied by certified statements of assets, liabilities, all bank statements and credit cards, known as ‘Formal Disclosure’.
  • In straightforward cases, where the Outline Disclosure simply confirms HMRC suspicions, HMRC will, inter alia, seek to agree any additional duties, interest payable and any penalty.
  • In complex cases, a ‘Disclosure Report’ may be prepared outlining, inter alia, how all irregularities, deliberate or not, have been quantified and the nature of all tax, duties and penalties due, together with a Certified Statement of all assets of a worldwide nature.
  • Once the CDF is in place HMRC gives an assurance that it will not proceed with a criminal investigation into irregularities into the recipient’s tax affairs unless there is cause to do so.
  • Once figures are agreed with HMRC in regard to amounts due in tax/duties, interest and penalties, this by reference to the reports submitted and these amounts have been paid, that should be the end of the process.

HMRC Criminal Investigation

HMRC may start a criminal investigation where:

  • an offer made under a CDF is rejected,
  • an acceptance letter is submitted but there is no valid Outline Disclosure,
  • incomplete Outline Disclosure is made,
  • false statements are made,
  • any false material documents are submitted.

General Points for Consideration

  • A CDF is only suitable to those who admit to having created a tax loss by deliberate conduct, wish to make a full disclosure of that tax loss, will work with HMRC to put their tax affairs in order, and pay tax, interest and penalties in order to do so.
  • If the recipient does not believe that a loss of tax has occurred through deliberate conduct, a ‘CDF Rejection Letter’ may be served within sixty days whereafter HMRC will start its own investigation which may involve a criminal investigation and the Rejection Letter may be used in court or tribunal proceedings as evidence.
  • COP 9 only applies to HMRC investigations and does not prevent other law enforcement agencies issuing proceedings for the offences in question. Additionally, a CDF will require detailed and concise disclosure of relevant information and a failure to disclose evidence, even when an individual may honestly believe the information is irrelevant, may still leave them liable to criminal prosecution on matters undisclosed.
  • HMRC may elect to publish details of deliberate defaulters as an exception to the general rule of confidentiality in taxation. A recipient of a COP9 may be able to avoid such publication upon the discretion of HMRC in circumstances where there is full co-operation.
  • Should HMRC seek to initiate criminal proceedings, despite co-operation with a CDF, it is likely that any attempted prosecution would be defeated by way of an Abuse of Process Application based upon the HMRC promise not to prosecute. In R v Abu Hamza, Lord Phillips CJ laid down the following test to determine whether a breach of prosecutorial promise was an abuse of process:

‘…it is not likely to constitute an abuse of process to proceed with a prosecution unless

  1. there has been an unequivocal representation by those with the conduct of the investigation or prosecution of a case that the defendant will not be prosecuted and
  1. that the defendant has acted on that representation to his detriment. Even then, if facts come to light which were not known when the representation was made, these may justify proceeding with the prosecution despite the representation.’

How we can help and support you

HMRC itself advises that before accepting or rejecting a COP 9 offer, legal advice/assistance should be sought. This is because, as noted above, cooperation within a COP 9 constitutes an admission to deliberate and dishonest behaviour.

Accordingly, should you receive any communication of any nature, including one containing an offer of a COP 9 from HMRC, you should seek immediate assistance. COP 9 offers and contracts can be complicated and the consequences severe.

As noted above, time restraints apply and it is important to react quickly in order to allow adequate time to consider your options and seek clear and concise legal advice.

The Team at KANGS solicitors offers vast experience in matters relating to Tax and Fraud investigations and proceedings and would be delighted to assist you.

We welcome enquires by:

Telephone: 0333 370 4333

Email: info@kangssolicitors.co.uk

We provide initial no obligation discussion at our three offices in London, Birmingham and Manchester. Alternatively, discussions can be held virtually through live conferencing or telephone.

Please Contact our Team as follows:

Hamraj Kang

Hamraj Kang
Senior Partner

Email Phone Mobile
John Veale

John Veale
Partner

Email Phone
Tim Thompson

Tim Thompson
Partner

Email Phone
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