COP9 is the term used for notices issued by HMRC investigating suspected cases of fraud where a criminal investigation has not commenced yet.
COP9 stands for Code of Practice 9 Civil Investigation of Fraud procedure.
HMRC’s Fraud Investigation Service launched a new COP9 Code of Practice on 14 June 2023.
Under the civil investigation of fraud procedure, the recipient of COP9 is given the opportunity to make a complete, accurate, open and honest disclosure of:
- – all their deliberate behaviour bringing about a loss of tax or duty, or payment administered by HMRC, (hereafter “deliberate behaviour”) and
- – all other irregularities in their tax affairs (including those arising from non-deliberate behaviour, such as careless errors and errors made despite taking reasonable care)
By the term ‘deliberate behaviour’ we mean that a person submitted 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.
Under COP9 the individual under investigation and HMRC will enter a contract whereby the individual commits to make a complete, accurate, open and honest disclosure of all deliberate behaviour and all other irregularities in their tax affairs. In return, HMRC commits not to open a criminal investigation. This is called the Contractual Disclosure Facility (CDF). You have 60 days from the date you receive the offer of the CDF to accept or reject it.
The Contractual Disclosure Facility is specifically for when you have deliberate behaviour to disclose. You can ask to enter the facility if your deliberate behaviour has brought about a loss in any of the taxes, duties or payments administered by HMRC, including the taxes, duties and payments that are listed.
What is the Contractual Disclosure Facility
The Contractual Disclosure Facility is a contract that gives you the assurance that HMRC will not carry out a criminal investigation into the deliberate behaviour you disclose. You do not have to wait for HMRC to offer you the facility or receive a COP9 notice. You can ask for it by filling in the contractual disclosure form CDF1.
Where the individual enters a CDF contract with HMRC upon receipt of a COP9 notice and then fails to make a complete, accurate, open and honest disclosure of the frauds bringing about a loss of tax, duty or payment administered by HMRC, the Commissioners reserve the right to commence a criminal investigation with a view to prosecution.
If the individual under investigation makes materially false or misleading statements or provides materially false documents during the investigation, the Commissioners reserve the right to commence a criminal investigation into whether such behaviour involved the commission of separate criminal offences.
What is Tax Fraud
Tax fraud is any dishonest deliberate behaviour in respect of an individual’s liability to pay tax, duties or levies.
This behaviour exposes HMRC to a risk of loss of revenue. It includes behaviour that might be prosecuted as cheating the public revenue, a statutory offence of fraudulent evasion of tax, or an offence of fraud. At its heart, it will involve the telling of lies or engaging in other dishonest behaviour that led to or was intended to lead to a risk of loss of tax.
This includes lying to HMRC about facts relevant to the assessment and collection of tax (including concealing or withholding relevant facts or failing to disclose a liability), dishonestly and deliberately claiming repayments or reliefs to which one is not eligible, or dishonestly and deliberately paying less tax than is properly owed.
A tax fraud requires dishonest deliberate behaviour, one cannot commit tax fraud by accident. It is possible for an individual to commit a tax fraud in respect of tax owed by another without personally making any gain.
Fraud in respect of HMRC’s functions not involving tax
HMRC has functions that do not relate to tax. For example, HMRC is responsible for paying some types of targeted financial support. HMRC may also use COP9 for the civil investigation of fraud where fraudulent claims have been made for these types of payments.
Appointing an advisor when you receive a COP9 notice
HMRC strongly advise that you seek independent professional advice upon receipt of a COP9 notice & before you respond to HMRC’s offer of the CDF. If you already have an advisor, you should contact them immediately. Many people find it helpful to appoint an advisor who specialises in COP9, as well as their regular advisor.
If you want HMRC to deal directly with your advisor on all matters covered by COP9, you must give them full authority to do so.
You can use either form 64-8, authorising your agent or form Comp 1, Compliance checks: temporary authorisation to allow HMRC to deal with your tax advisor. Make sure your authority covers all taxes and duties. Both forms are available on gov.uk.
You must give your advisor all the facts and relevant documents. You are personally responsible for your tax affairs and the accuracy of any information supplied to HMRC on your behalf.
Any costs that you incur in respect of Hmrc’s investigation & COP9 notice cannot normally be claimed as an expense against tax.
How to Make a Voluntary Disclosure to HMRC
If you do not have a deliberate behaviour to disclose and you would like to bring your tax affairs up to date & resolve careless errors, you should:
- – tell HMRC that you want to make a disclosure (notify)
- – tell HMRC about all income, gains, tax and duties you’ve not told them about before (disclose)
- – make a formal offer
- – pay what you owe
- – help HMRC as much as you can if they ask you for more information
Why You Should Disclose
It does not matter why your tax affairs are wrong, it’s better to go to HMRC and admit any failures or inaccuracies rather than wait until HMRC contact you.
Who can use the Worldwide Disclosure Facility?
Anyone who wants to disclose a UK tax liability that relates wholly or partly to an offshore issue can use the Worldwide Disclosure Facility. An offshore issue includes unpaid or omitted tax relating to:
- – income arising from a source in a territory outside the UK
- – assets situated or held in a territory outside the UK
- – activities carried on wholly or mainly in a territory outside the UK
- – anything having an effect as if it were income, assets or activities of a kind described above
It also includes funds connected to unpaid or omitted UK tax that you have transferred to a territory outside the UK or are owned in a territory outside the UK.
If at any time HMRC knows or suspects that assets or funds included in your disclosure are wholly or partly made up of criminal property, HMRC has the discretion to refuse your application to take part in the Worldwide Disclosure Facility.
How can MCL Accountants help with disclosure regarding inaccuracies on tax returns due to careless errors that aren’t deliberate?
Contact MCL Accountants on 01702 593 029 if you want us to help with your Voluntary Disclosure, Worldwide Disclosure or if you need any assistance with the preparation and submission of your business accounts or self-assessment tax returns to HMRC.
We cannot assist you with any Code of Practice 9 (COP9) notice related queries or CDF responses.
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Ishan provides financial management, taxation and transactional advice to business entities of all sizes. His expert areas include statutory compliance, business taxation, personal tax & transactional processing and systems. Industry sectors include professional services, retail, hospitality and entertaining & media and advertising services.