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Not a Fair Cop

New guidance for Code of Practice 9 investigations

Under new guidance published by HMRC, those under suspicion of fraud will no longer have the option of co-operating with an investigation where they deny dishonest behaviour.

HMRC conduct investigations under Code of Practice (COP) 9 in cases where they suspect tax fraud. In many cases they will carry out criminal investigations with a view to prosecution. Immunity from prosecution can, however, be achieved by making a full disclosure under a contractual arrangement called a Contractual Disclosure Facility (CDF).

Where HMRC offer the opportunity to make a full disclosure, then the taxpayer has 60 days to respond. Should a full and frank disclosure of deliberate wrongdoing ensue that HMRC will not pursue a criminal investigation with a view to a prosecution.

The CDF route is only suitable for someone who:

  • has brought about a tax loss through their deliberate conduct and wishes to make a full disclosure of that loss;
  • will work with HMRC to put their tax affairs in order, including paying any tax, interest and penalty that may be owed; and
  • will desist from evading tax.

‘Deliberate conduct’ refers to a person who knows that entries on their tax returns are wrong but submit them regardless. By so doing they know that tax has been evaded but choose not to tell HMRC at the right time.

CDF is not appropriate for those who want to disclose any careless errors or mistakes.

Where someone believes that they have not brought about a loss of tax through their own deliberate conduct then they can sign a CDF Rejection Letter within the same 60 day period. However, a person needs to be absolutely certain of their innocence because once HMRC begin their investigation it can become a criminal investigation.

If, in response to a Rejection Letter, the Revenue proceed with a civil investigation they reserve the right to escalate the case to a criminal investigation if they consider it appropriate.

Previously, three options were available under COP9:

  1. Acceptance of a CDF offer
  2. Denial with co-operation
  3. Denial without co-operation

Now, only two courses of action are available to taxpayers.

Anyone receiving a COP9 letter should seriously consider their course of action and seek expert advice, especially where penalties for tax fraud can be charged up to 200% of the tax lost.

By Andy Vessey

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