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On 14 June 2023, HMRC published a substantially rewritten Code of Practice 9 (“COP9”). Set out below are the key changes implemented as a result of this publication.

What is COP9?

COP9 is a process whereby a person whom HMRC suspects is guilty of tax fraud is given the opportunity to make a disclosure setting out the background/reasons for any non-compliance and make good any potentially unpaid tax. In exchange, subject to the exceptions listed under “Key Change 2” below, HMRC will formally agree not to open a criminal investigation. This agreement is called the Contractual Disclosure Facility or “CDF”.

Key Change 1 – Broadening the Definition of Tax Fraud

Previously, tax fraud was defined as “dishonest behaviour that led to or was intended to lead to a loss of tax”. Under the new COP9 however, this has been extended to “dishonest behaviour that led to or was intended to lead to a risk of loss of tax”. It further confirms that an individual will still fall within this definition even if the fraud is in respect of tax owed by another, even if the individual does not personally make any gain.

Key Change 2 – New Guidance on Circumstances When HMRC Can Escalate to Criminal Investigation

Pursuant to the new COP9, HMRC may still conduct a criminal investigation under the following circumstances:

1. Deemed rejection: if a response to the CDF offer is not received by HMRC within 60 days;
2. Rejection: the taxpayer expressly rejects the offer;
3. No Outline Disclosure (as defined in COP9) is provided with the standard Acceptance Letter;
4. Incomplete Outline Disclosure: if HMRC suspect an individual of further tax fraud not disclosed, they can still conduct a criminal investigation into such fraud. Any fraud disclosed in the Outline Disclosure may still be exempt from any subsequent criminal investigation;
5. False statement or false documents submitted;
6. Incorrect or incomplete Formal Disclosure documents;
7. Withdrawing the admission of deliberate behaviour: HMRC will still consider any explanation offered as to the reason for a renewed position as regards behaviour but such a change in approach will (in the absence of a good reason) be considered a repudiation of the CDF. Any material disclosed prior to the repudiation of the CDF may be used as evidence in any subsequent criminal investigation.

Key Change 3 – Personal Attendance at Meetings

The new COP9 guidance emphasises the importance HMRC now places on the individual attending meetings, stating “we view your attendance and your cooperation at meetings if we ask you to attend them as a strong indication of your engagement with the investigation.” Whilst an advisor may accompany the individual, under the updated COP9 procedure, it is clear that personal attendance by the individual is expected.

Key Change 4 – Payment to HMRC

Included within the new terms of the CDF is an expectation that the individual will make a payment on account of any arrears of tax or duty. This obligation arises at the stage of making the Outline Disclosure but there is also an expectation that the individual will make payments on account throughout the investigation as well as upon completion of the Formal Disclosure.

For further advice on COP9, please contact Helen McGhee hmcghee@jha.com