HMRC Investigation Under Code of Practice 9 | Kangs Tax Solicitors
Whilst HMRC enjoys total discretion as to whether or not to pursue a criminal prosecution in circumstances considered appropriate, it may, alternatively, pursue an investigation using Code of Practice 9 (‘COP9’).
The service of a COP9 letter provides the recipient with the opportunity to make a complete disclosure of all the activity, deliberate or otherwise, that has led to the suspicion of tax irregularities.
Should HMRC thereafter consider that the recipient of the COP9 letter has failed to make full and accurate disclosure, criminal proceedings may then be commenced.
John Veale of Kangs Solicitors outlines the COP9 procedure.
Conduct of a COP 9 Investigation
- Under the COP9 procedure, HMRC offers the chance to make full disclosure under a contractual arrangement known as a Contractual Disclosure Facility (‘CDF’).
- The recipient of a CDF has sixty days to comply with two disclosure stages commencing with a valid ‘Outline Disclosure’ of the deliberate conduct which has resulted in the tax loss.
- This Outline Disclosure is followed by a ‘Certified Statement’ in which it is confirmed that a full, complete and accurate disclosure of all tax irregularities has been made, accompanied by certified statements of assets, liabilities, all bank accounts and credit cards, known as a ‘Formal Disclosure’.
- A CDF is only suitable to those who have created a tax loss by deliberate conduct, wish to make a full disclosure of that tax loss, will work with HMRC to put their tax affairs in order, and pay tax, interest and penalties in order to do so.
- If the recipient does not believe that a loss of tax has occurred through deliberate conduct, a ‘CDF Rejection Letter’ may be served within sixty days whereafter HMRC will start its own investigation which may involve a criminal investigation and the Rejection Letter may be used in court or tribunal proceedings as evidence.
- In straightforward cases, where the Outline Disclosure simply confirms HMRC suspicions, HMRC will, inter alia, seek to agree any additional duties, interest payable and any penalty.
- In complex cases, a ‘Disclosure Report’ may be prepared outlining, inter alia, how all irregularities, deliberate or not, have been quantified and the nature of all tax, duties and penalties due, together with a Certified Statement of all assets of a worldwide nature.
- Once the CDF is in place HMRC gives an assurance that it will not proceed with a criminal investigation into irregularities into the recipient’s tax affairs unless there is cause to do so.
- Entering into a CDF means that the recipient admits a tax loss due to deliberate conduct, and that the recipient will co-operate with HMRC.
- As a result of full co-operation with HMRC the recipient may receive a reduction in any penalty that is applied.
- Once figures are agreed with HMRC in regard to amounts due in tax/duties, interest and penalties, this by reference to the reports submitted and these amounts have been paid, that should be the end of the process.
Possible Commencement of Criminal Investigation
HMRC may start a criminal investigation if:
- an offer made under a CDF is rejected,
- an acceptance letter is submitted but there is no subsequent or valid Outline Disclosure,
- incomplete Outline Disclosure is made,
- false statements are made,
- any false formal disclosure documents are submitted.
Penalties
- Penalties may be charged in accordance with the provisions of current legislation and, in certain cases, can be up to 200% of the tax loss.
- HMRC may negotiate a reduction for co-operation and positive behaviour.
Who Can I Contact for Advice & Help?
If you or your business are made subject to any form of enquiry by HMRC, please feel free to contact us immediately.
Our experienced Team will assist and provide detailed guidance regarding all aspects of HMRC investigations from onset, to Tax Tribunal or potential criminal proceedings.
Please do not hesitate to contact the team at Kangs Solicitors through any of the following who will be pleased to speak to you:
Hamraj Kang
Email Hamraj
07976 258171
020 7936 6396
0121 449 9888
Tim Thompson
Email Tim
020 7936 6396
0121 449 9888
