HMRC COP 9 Investigation (Code of Practice 9)

HMRC Fraud Investigation Service (FIS) uses the Code of Practice 9 (COP9) as part of the Contractual Disclosure Facility (CDF). Code of Practice 9 outlines HMRC’s approach to cases of suspected, planned tax evasion and explains how to use the CDF. It details the repercussions of admitting deliberate tax fraud, the steps that follow after admission, and the benefits of fully disclosing information to HMRC.

HMRC only offers the Contractual Disclosure Facility and issues Code of Practice 9 when they suspect significant tax fraud. Before entering into a CDF with HMRC, it’s important to get specialist advice. There may be instances where HMRC issues a COP9 letter without thorough investigation, and it could simply be a matter of compliance.

If you receive a COP9 letter, consulting our Tax Advisors can help you understand your situation and guide you on the best course of action. They can provide valuable assistance because they have experience dealing with similar cases.

Code of Practice 9 (COP9) investigations begin when HM Revenue & Customs (HMRC) suspects that someone has committed serious tax fraud or deliberately avoided paying taxes. This suspicion might come from errors in tax returns, inconsistencies in financial records, or information from others. HMRC carefully reviews all the evidence before deciding to start a COP9 investigation. They consider factors like the size of the suspected fraud, the person’s history with taxes, and how it affects public money.

Once HMRC decides there’s enough reason to be suspicious, they notify the taxpayer in writing that a COP9 investigation has started. The taxpayer then has the chance to cooperate by providing any relevant information or explanations. It’s important to understand that getting a COP9 notice doesn’t always mean you’ve done something wrong but that HMRC thinks fraud might have happened.

If you receive such a notice, getting help from our Tax Specialist can be very helpful. We can guide you through the process and explain what steps you should take next.

HMRC will never disclose what evidence they have against a taxpayer. Challenging a Code of Practice 9 (COP9) Tax Investigation letter on the basis of wrongful issuance has yet to be successful in tax tribunals. Therefore, taxpayers must complete the necessary forms and inform HMRC about any discrepancies or untaxed income and gains.

Most of the time, a COP9 Tax investigation occurs because the taxpayer or their representative has not complied or cooperated with HMRC. This kind of behaviour leads HMRC to suspect tax evasion. In some cases, HMRC has been tipped off by third parties regarding tax evasion. They even have a dedicated page where people can report tax fraud and evasion anonymously.

Another way HMRC gathers information is through Connect, an advanced software system. It can create a profile of a taxpayer by scanning their bank accounts, credit cards, vehicle registrations, and property records and requesting details worldwide from international organizations using automatic exchange portals.

When you receive a COP9 Investigation Letter from HM Revenue & Customs (HMRC), it’s important to understand that this is your one-time chance to disclose all tax irregularities—to “come clean.” A Code of Practice 9 (COP9) Tax Investigation is not an ordinary inquiry that starts just because HMRC suspects tax evasion. They may have already done their initial research, or there might be too many discrepancies that could lead to additional taxes.

As part of the COP9 and Contractual Disclosure Facility (CDF) process, you are required to identify any mistakes or both unintentional and deliberate inaccuracies. Providing false information can result in a criminal investigation and possible prosecution.

Irregularities or mistakes include false or excessive claims for tax relief, costs, Value Added Tax (VAT), and so on. Never lose sight of the word “deliberate” when being investigated by HMRC under COP9. When you accept the terms under the CDF, you admit to deliberate conduct where tax has been avoided, and you were aware of it.

Your admission to tax evasion will affect the nature, scope, and determination of penalties under COP9. Any inaccuracies that you did not contribute to can be identified and treated separately when deciding the outcome of the investigation. Please be aware that any disclosure of materially false information or making false representations can lead to a criminal investigation and possible prosecution.

You have 60 days from the date you receive the COP9 letter to decide whether to use the CDF and detail the nature of the deliberate fraud and the expected tax avoided, including PAYE, Self Assessment, VAT, Corporation Tax, Capital Gains Tax, and Inheritance Tax for the last 20 years to HMRC in writing.

If you fail to return the COP9 forms within 60 days, HMRC will take this as a denial. As a result, they will begin their investigation into your tax returns. You should cooperate with HMRC and provide them with the documents they request.

During a Code of Practice 9 (COP9) investigation, HMRC thoroughly examines a person’s financial affairs. They look at tax returns, bank statements, business records, and other important documents. The investigation might include interviews with the person, their employees, or others who might know about the suspected fraud. HMRC may also seek information from banks or other financial institutions.

The purpose of the investigation is to gather evidence and determine whether tax fraud has actually occurred. If they find evidence of fraud, HMRC will assess how serious it is and calculate the amount of tax that has been evaded. The person will be given a chance to explain and cooperate with the investigation. In some cases, they might be offered the opportunity to settle by paying the unpaid tax along with any penalties and interest charges.

However, if the person chooses not to cooperate or if the fraud is found to be particularly serious, HMRC may pursue criminal charges. This means the situation can become much more severe, so it’s important to take the investigation seriously and provide any requested information.

A COP9 investigation can take months or even years, depending on the complexity of the case and the cooperation of the individual. The process requires a careful review of financial records, which can take much time, especially if the documents need more information. HMRC may need to talk to several people and collect details from different sources, which can also make the process longer. If the person being investigated provides all the requested information quickly and cooperates fully, the investigation might move faster. However, if they are uncooperative or if the case is very complex, the investigation can extend for a year or more. Throughout the process, HMRC will keep the person informed about any progress and changes in the case. They might also ask for additional information or require the person to attend interviews as the investigation continues.

Did you know that HM Revenue & Customs (HMRC) now have access to the automatic exchange portal of the Organisation for Economic Co-operation and Development (OECD)? This portal is designed to share taxpayers’ details across different countries. So, if you are a British national or live in the UK, you are subject to British tax laws. HMRC can access information about your assets, including bank accounts and properties.

But not everyone receives a Code of Practice 9 (COP9) letter when HMRC obtains information through this portal. Most of the time, they will ask you to disclose any undisclosed income and assets without starting a formal inquiry or investigation. You can read more about the Common Reporting Standards, which are guidelines for exchanging taxpayer data between countries.

The consequences of a COP9 investigation can be quite serious, depending on the findings and the scale of any tax fraud uncovered. If it’s found that tax fraud has occurred, the individual involved may face a range of penalties, which could include financial sanctions, criminal prosecution, and potentially imprisonment. A typical requirement is the repayment of the evaded tax, along with interest and significant penalties, sometimes up to 200% of the tax due.

In addition to financial penalties, individuals may also be responsible for covering the costs of the investigation. In more severe cases, criminal charges could be pursued, with tax fraud carrying a potential prison sentence of up to seven years in the UK, depending on the fraud’s severity. A criminal conviction could severely impact the individual’s personal and professional reputation and might make future employment challenging.

Even if criminal charges aren’t pursued, the financial repercussions and the potential for public naming can be daunting. Those involved in a COP9 investigation must take the matter seriously and seek professional guidance to navigate the process and reduce the possible consequences effectively.

Yes, sometimes a person can avoid a COP9 investigation by voluntarily telling HM Revenue & Customs (HMRC) about any tax fraud or mistakes before they start an investigation. This is known as making a voluntary disclosure. By coming forward on their own, they can “come clean” about their taxes and avoid the serious consequences that might come with a COP9 investigation.

When someone makes a voluntary disclosure, they are admitting to tax fraud and agreeing to pay back the taxes they owe, along with any penalties and interest charges. In return, HMRC may decide to treat the case as a civil matter rather than a criminal one, which can help the person avoid criminal prosecution and damage to their reputation.

To make a voluntary disclosure, the person must contact HMRC and provide a full and honest account of their tax affairs, including details of any income they didn’t declare or taxes they haven’t paid. They must also fully cooperate with HMRC and provide any requested information or documents.

Voluntary disclosure does not ensure that HMRC will avoid a COP9 investigation or criminal charges. Each case is assessed individually, and further investigation may occur if the fraud is serious or if there is a history of tax law non-compliance.

When you receive a notice from HM Revenue & Customs (HMRC), it’s important to understand that this isn’t a formal investigation, but the next 12 to 18 months could be very stressful. HMRC has asked you to either file a disclosure within 60 days or deny any involvement in tax evasion or fraud.

You’ll need an accountant to calculate the actual amount of tax you owe. You must provide estimated figures and explain how the situation occurred in your disclosure. Since you know your finances best, you’re in the best position to estimate any income you failed to report over the years. An accountant can help calculate the tax and consider other factors.

However, accountants who lack experience in these types of investigations might not recognise untaxed income and may rely solely on documents already submitted to HMRC by previous accountants. It’s wise to consult with specialist accountants who can identify untaxed income by reviewing your documents and discussing your business activities with you.

On the other hand, a lawyer can advise you on legal matters, but they would still need an accountant to analyse your income and calculate the taxes owed.

HMRC can look back up to 21 years into your trading history during an investigation. However, if you’ve had different businesses over the past 20 years, your advisor or accountant can discuss with HMRC where to begin. It’s the accountant’s job to narrow down the tax investigation to specific years so they can focus on the actual periods when income wasn’t disclosed in accounts and tax returns.

As a general rule, HMRC will ask for the last year when all your tax affairs were in order. To figure this out, our tax accountants look back to earlier years. If they notice any discrepancies, they will go further back until they reach a point where everything is correct. Then, they will agree with HMRC on the tax years to be investigated.

If you’ve been insolvent or bankrupt in the past, the starting date for the investigation will be from when you started your business after bankruptcy.

When you receive a COP9 Tax Investigation notice, you must return the CDF form, either accepting or denying the offer. If you don’t send it back, the authorities will assume you’re denying it. They can only close the investigation if they accept your explanation along with the CDF form. Not submitting the CDF isn’t an option. By accepting that you’ve evaded taxes and submitting the CDF form, you gain immunity from prosecution. But if you don’t send it, they will continue investigating and might start a criminal case against you.

Code of Practice 9 (COP9) Tax Investigation focuses on cooperation with HM Revenue & Customs. From the very first interview to the moment any outstanding tax is paid, you are expected to fully cooperate with your accountant, your representatives, and HMRC officers. Your cooperation will determine the penalty you receive. The minimum penalty HMRC can charge is 35% of the tax owed and can go up to 150%.

If there are other matters you need to disclose, this is your opportunity to come clean. We always meet with clients who have received a COP9 letter to assess the amount of work involved. This is not a typical investigation, and it won’t involve standard analysis and accounting. For further details, please call our office.

If you have a partner involved in your tax matters, it’s important to let HM Revenue & Customs (HMRC) know and explain how it happened. Doing so can save time because HMRC might allow your partner to agree to the tax figures instead of starting a new investigation. Every situation is unique and will be judged on its own merits. If you’re unsure where to begin or need help, consider seeking professional advice to evaluate your case.

During a Code of Practice 9 (COP9) investigation, it’s important to protect your rights and interests. Getting advice from a professional experienced in COP9 cases is crucial because they can help you understand how to respond to questions from HM Revenue & Customs.

Be cautious about the information you share with HMRC since anything you say can be used as evidence. It’s important to keep detailed records of all communications to demonstrate your cooperation with the investigation.

If you think you’ve made mistakes on your tax returns, consider making a voluntary disclosure to HMRC. This can help lessen potential consequences. Being proactive by providing information and responding promptly to HMRC’s requests can minimise the impact of the COP9 investigation on your personal and professional life.

Depending on their situation, there are several ways a person might respond to a Code of Practice 9 (COP9) investigation by HM Revenue and Customs. One possible defence is claiming that any mistakes on their tax returns were honest errors, not deliberate attempts to avoid taxes. If they can show they took reasonable care when filling out their tax forms and that any errors were unintentional, this might lessen the consequences of the investigation.

Another defence is that they relied on professional advice when preparing their tax returns. If they can prove they sought and followed the guidance of a qualified expert, it may demonstrate they acted in good faith and reduce their responsibility for any mistakes. In some cases, a person might argue that HMRC’s investigation is unfounded or that there’s not enough evidence to support claims of tax fraud.

If you are under a COP9 investigation by HMRC, you can challenge their suspicions or show that you have followed the tax laws. Your defence will depend on your specific situation and may not always work, so it’s a good idea to get help from a legal professional. The best way to avoid an investigation is to keep accurate tax records and communicate clearly with HMRC.

One of the most immediate implications is that the taxpayer may be subject to increased scrutiny from HMRC in the future. HMRC may flag the taxpayer’s file for closer monitoring and may conduct more frequent or detailed reviews of their tax returns and financial affairs. This increased scrutiny can be time-consuming and stressful for the taxpayer and may require them to devote additional resources to ensuring that their tax affairs are in order. 

In some cases, the taxpayer may also be required to provide more detailed information or documentation to HMRC on an ongoing basis, such as regular reports on their financial transactions or business activities. Another implication of a COP9 investigation is that the taxpayer may face difficulties in obtaining credit or financing in the future. Lenders and other financial institutions may view the taxpayer as a higher risk and may be less willing to extend credit or may require more stringent terms and conditions. This can make it harder for the taxpayer to access the funds they need to grow their business or to manage their personal finances. 

In addition, a COP9 investigation can have reputational implications for the taxpayer, particularly if the investigation becomes public knowledge. The taxpayer may face damage to their personal or professional reputation, which can have a lasting impact on their ability to attract customers, clients, or investors. To mitigate these implications, it is important for the taxpayer to take steps to ensure that their tax affairs are in order going forward. This may involve implementing new systems and processes for managing their finances, seeking the advice of a qualified tax advisor, and being proactive in their dealings with HMRC. 

By demonstrating a commitment to compliance and transparency, the taxpayer can help to rebuild their reputation and minimize the long-term impact of the COP9 investigation on their future tax affairs.