What is COP9?

A COP9 investigation is a very serious affair. If you have received a letter from HMRC informing you that you are under a COP9 investigation, or you are considering applying for it yourself, it’s vital that you go into it fully informed.

In this article, we’ll discuss what COP9 is, what a CDF is, whether you should agree to entering COP9, what the COP9 process looks like, and what the penalties are.

 

What is COP9?

COP9 stands for Code of Practice 9. It’s a serious tax investigation that is initiated when HMRC believes you have engaged in, or you voluntarily admit to, deliberate tax evasion.

Under COP9, you are able to be fully honest with HMRC about deliberate tax evasion measures you have taken in return for immunity from criminal prosecution.

 

How is COP9 different from COP8?

COP8 enquiries are for investigating underpaid tax that is not the result of deliberate tax evasion. COP9 is for deliberate evasion.

 

Why am I being investigated?

You may be confused as to why you are under investigation. There are many triggers for HMRC investigations, including irregularities in your tax returns, tip-offs, and information given to them from third party financial institutions, like offshore trusts.

What is a CDF?

CDF stands for Contractual Disclosure Facility. Under COP9, you can enter into a CDF and voluntarily disclose all deliberate tax evasion measures.

When you enter into a CDF, you are admitting you are guilty of deliberate tax evasion. In exchange for your cooperation, you’ll be immune from criminal prosecution, but will still face civil penalties.

 

Should I accept COP9?

If HMRC say they are using COP9 to investigate you for tax evasion, you can decline to cooperate and they will pursue a standard serious tax evasion investigation. If you are found guilty of deliberate tax evasion, you will be vulnerable to criminal prosecution, including a possible prison sentence.

HMRC offers COP9 as it’s mutually beneficial to both parties – you tell them in great detail everything you’ve done to evade tax, and you are protected from criminal prosecution (but not other penalties). If you know you have deliberately evaded tax, COP9 is a good option for you.

If you are truly innocent of deliberate tax evasion, it is not a good idea to enter a CDF under COP9. This would be admitting you actually took calculated steps to evade tax, pushing the penalties higher. If you have not engaged in tax evasion at all, or have done so accidentally/through carelessness, your solicitor can guide you through the best steps for you instead.

 

Can I initiate COP9 myself?

Yes – if you know you have deliberately evaded tax, you can make a voluntary disclosure to HMRC under COP9.

If you choose to do this, you should instruct a solicitor to facilitate the process and guide you towards the best possible outcome.

 

What does the process look like for COP9?

The COP9 process can be lengthy and complicated. This is how it works for most cases:

 

Initiation

COP9 can be initiated by HMRC or the taxpayer.

If initiated by HMRC, they will send you a formal letter letting you know you are under investigation, the scope of the investigation, and the offer to enter into a CDF to admit deliberate tax evasion measures you may have taken. You have 60 days to accept or reject the offer.

If you apply for COP9, you’ll submit a form, HMRC will do a background check on you (including to see if you are already under criminal investigation), and they will send you a formal letter within 2 weeks confirming you are accepted into the COP9 process.

 

Outline disclosure

You have 60 days from the opening of the COP9 process to submit an “outline disclosure”. This is a formal document where you make a full disclosure of all the tax evasion activities you’ve engaged in.

The outline disclosure requires a number of details, including the type of tax fraud, the tax years affected, the amount of money involved, and all individuals/entities involved in the evasion.

Within 4 weeks, HMRC will decide whether the outline disclosure you submitted is valid.

 

Opening meeting

HMRC will arrange a face-to-face opening meeting. You aren’t under any legal obligation to attend, but failure to attend will reflect very badly on you and you may be penalised more harshly for failure to cooperate.

During the meeting, HMRC will probe you on details you included in your disclosure.

 

Full disclosure report

You and HMRC will agree on a timeline for you to produce a Full Disclosure Report.

This report is incredibly comprehensive. It expands on the outline disclosure and includes information like:

• Full details of all tax irregularities.
• The amount of tax owed.
• Evidence documents like bank statements, invoices, etc.

It is highly advised that you have a tax specialist prepare this document for you. It must be accurate to avoid increased penalties.

Whilst you are preparing the report, HMRC may ask for progress meetings/calls.

Around 2-3 months after the report is submitted, HMRC will confirm they are happy or will ask some follow up questions.

 

Penalty negotiations

Once the disclosure report is complete and accepted, there will be a final meeting. HMRC will calculate the final penalties for the tax evasion.

 

Case closing

You will settle your tax liability and HMRC can close the investigation. If you do not cooperate through the process, or try to mislead HMRC in any way, they will end COP9 and proceed with criminal prosecution.

They may publish your details publicly for others to see that you have deliberately evaded tax.

What are the penalties for COP9?

The tax evasion penalties you receive under COP9 vary depending on the scale and severity of the fraud, your cooperation with HMRC, whether you had to be prompted to disclose your actions, and other mitigating factors.

Generally, for deliberate but not concealed evasion, you’ll receive a penalty of 20-70% of the tax owed, on top of the owed tax and interest.

For deliberate and concealed behaviour, penalties range from 30-100% of the tax owed, on top of the owed tax and interest.

 

What do I do if I’m the subject of a COP9 investigation?

If HMRC suspects you of deliberate tax fraud and have initiated a COP9 investigation, it is crucial that you seek professional help. A tax fraud solicitor is best placed to assist you.

Many taxpayers at the centre of COP9 investigations seek tax experts as their first port of call. We urge you to instruct a solicitor first instead. We are legally bound to keep all of your communications with us confidential, so you have breathing space to discuss your case and next steps. Tax experts are not bound by this confidentiality agreement and are actually legally required to report tax evasion to HMRC, unless they have been instructed by a solicitor to help on a case.

At Holborn Adams, we believe early intervention is the key to the best outcomes. We strive to secure the lowest penalties for COP9 cases. With our legal expertise, we are better positioned to negotiate the best outcome for you versus a tax expert alone.

For help navigating your COP9 investigation, please contact us today.

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