A Code of Practice 9 investigation is undertaken by HMRC’s Fraud Investigation Service (FIS) where they suspect serious tax fraud has occurred and they wish to recover the tax on a civil basis rather than pursue a criminal tax investigation with a view to prosecution.

HMRC will invite the taxpayer to engage with them under the contractual disclosure facility (CDF) process. It is important that taxpayers who receive a notice from HMRC offering them the CDF understand the complex process and implications of being offered the facility. They only have 60 days to respond to HMRC to accept or reject the CDF offer. Specialist advice must therefore be sought immediately.

If the taxpayer accepts the offer of CDF then they must formally admit that they have been complicit in tax fraud and provide an outline disclosure of the irregularities caused deliberately by them. This needs to include all fraudulent defalcations as HMRC may still criminally investigate if additional risks are identified during the course of the investigation.

Rejection of the CDF process will cause HMRC to consider whether they investigate on a criminal basis or civil basis. The taxpayer’s rejection letter can be used as evidence in criminal proceedings. Specialist advice must, therefore, be sought to manage HMRC’s expectations properly.

Failure to respond within the 60 day time limit will be considered to be a rejection of the offer.

Why have I received this notice?

Before issuing the Code of Practice 9 (COP9) notice, the information held would have been reviewed by HMRC’s Fraud Investigation Service, who deal with suspected serious tax fraud and criminal investigations. HMRC will believe that there has been an underpayment of tax and that this underpayment has been deliberately and fraudulently manufactured.

If you have received the COP9 notice then HMRC have decided to pursue your suspected tax fraud case on a civil basis and seek to recover the lost revenues. However, failure to manage the COP9 process correctly could see your case being referred back to the criminal investigations team and HMRC seeking prosecution. Tax evasion is a criminal offence (Cheating the Public Revenue) and carries the maximum prison sentence.

Due to the seriousness of such an allegation, specialist advice should be obtained immediately upon receipt of the notice to ensure that the process is managed carefully.