How the Contract Disclosure Facility works and what to do if you receive a Code of Practice (COP 9) letter.
What is a COP 9?
A Code of Practice 9 or COP 9 takes place when HMRC suspects serious tax fraud has taken place. HMRC carries out the procedure under the Contractual Disclosure Facility (CDF) process using their Fraud Investigation Services (FIS) team. The CDF replaced the previous Civil Investigation of Fraud procedures. The facility is only relevant for people willing to admit fraud. It is not suitable for reporting obvious errors or avoidance schemes where this is no clear fraud. COP 9 is offered to those wishing to own up to fraud if HMRC is prepared to settle the tax liability civilly rather than criminally.
The Contractual Disclosure Facility – CFD Explained
This facility (The CDF Offer) is sent to taxpayers when HMRC suspect that tax fraud has taken place. This process involves agreeing to make an outline disclosure (OD) within a suggested 60 day period. The OD ensures that all individual and tax irregularities are set out from the very beginning. HMRC receive information from a number of different sources. They will, however, not tell you what information they hold or what suspicions they have. It is up to you to make full disclosure to them. HMRC will not undertake a COP 9 investigation unless they have firm evidence that serious tax fraud has taken place. The facility is not suitable for those wishing to inform HMRC of careless mistakes, errors or tax avoidance schemes. If you accept the offer you are immune from criminal investigation and prosecution.
You will receive immunity only in relation to what you disclose but in return you must provide:
- Admission that your behaviour was deliberate.
- Disclosure of all irregularities and omissions.
- You must also be fully cooperative with HMRC
There are three options if you have received a COP 9 letter:
- The Contractual Disclosure Facility route: Owning up to tax fraud.
- The Denial route: Denying any wrongdoing.
- The Non-Cooperation route: ignoring HMRC’s letter and offer
Click here to see the process flowchart.
HMRC promise not to pursue a criminal investigation if the taxpayer signs the document and owns up to the fraud. The expiry date for accepting the offer and submission is printed at the top of the Outline Disclosure form. There will be no extension of time under any circumstances.
The COP 9 Outline Disclosure
The outline disclosure should contain the following details:
- What tax fraud took place?
- How was it committed?
- The involvement of any other people and entities?
- How you benefited from the fraud?
EACH separate tax fraud must list the above information.
Sign and return the COP 9 Contractual Disclosure Facility denial letter to HMRC if no tax fraud has taken place. If HMRC verifies and accepts your denial, then they will issue confirmation they no longer suspect you. If you make a denial that proves to be untrue you may be referred to the Criminal Investigation Team. Court or tribunal proceedings rely on the denial letter as evidence. Signing the contract before you get professional, specialist advice may have serious repercussions. Do not contact HMRC directly. Remember they record all conversations which can be used in evidence against you at a later date.
What Happens If I Ignore HMRC?
If you simply ignore everything and do not contact HMRC, either on your own or through a professional advisor then HMRC will continue to investigate your tax affairs. This may lead to a civil or criminal prosecution. In the event that they are successful in pursuing this, the penalties will be much higher than if you had cooperated fully in the first instance. By filling in a from 64-8 you can authorise us to work on your behalf during the COP 9.
Should I Get Professional Help?
As mentioned above, HMRC will not divulge the information it holds on you prior to or during a COP 9 investigation. This makes it extremely challenging for a non-specialist advisor to navigate the process, which includes advising whether to accept the CDF offer. Clearly, making the wrong move could cost the individually dearly, in more ways that one. HMRC actively encourage individuals to seek “independent advice” when under investigation, especially ones familiar with the COP 9 process. By speaking with a specialist advisor like us, and getting proper help, you will reduce the cost of the investigation and vastly improve the chances of a favourable outcome. The penalties can be severe, apart from the high stress of meeting with HMRC on your own.
Code of Practice 9 – 10 Questions Asked
- Any tax fraud investigation conducted under COP9 regulations follows a specific protocol.
- HMRC investigators ask 6 set questions on Direct Taxation and 4 on Indirect Taxation during an interview. NOTHING ELSE.
- An interview conducted as a Code of Practice 9 tax fraud investigation follows a standard pattern.
- The interview begins with the investigator introducing himself and his colleague.
- The HMRC investigator will outline the function of Special Civil Investigations or Civil Investigation of Fraud teams when investigating suspected serious tax fraud. He will then say that HMRC has information indicating that the taxpayer’s accounts and returns may be incorrect.
- Although there may be an innocent explanation, the investigator will explain it is his duty to fully investigate the matter.
- At this stage, HMRC will feel fairly confident that they have a case.
- They will have conducted a detailed investigation prior to the interview bringing potentially damaging information to the meeting.
- HMRC discuss both direct and indirect tax matters in the interview.
- They structure the meeting so that the taxpayer is aware of what tax is being considered. Each one dealt with separately.
Click here to see the ten questions asked in an interview (opens a PDF)
It is vital that you get an expert in dealing with HMRC tax investigations to deal with your case. Speak to us before you speak to them. KinsellaTax will prepare a Disclosure Report on your behalf. This includes answers to questions not given to the investigator at the time of the meeting. Our tax investigation experts will handle your case, leaving you to get on with living your life.
Call KinsellaTax NOW on 0800 471 4546 for free, 100% confidential advice about COP 9. We are on your side.