From 1 July 2014 HMRC’s Code Of Practice 9 (“HM Revenue & Customs investigations where we suspect tax fraud”); has been amended to take out the so-called “Cooperative Denial” option, and also to clarify that the behaviour which they expect to be disclosed falls into the “Deliberate” category; for both penalties and assessing time limit purposes.
HMRC’s Code Of Practice 9 is issued in cases where the taxman decides to investigate suspected tax evasion using civil, rather than criminal, powers. Taxpayers are then offered the opportunity to take part in the Contractual Disclosure Facility (CDF). Prior to 1 July 2014 the opening letter of a COP9 case offered a taxpayer three options. One of these was to notify HMRC that they accepted that their behaviour amounted to tax fraud, and that they were going to make a full disclosure. A second option was that the taxpayer stated that they were denying any tax fraud and were refusing to cooperate. The third option allowed the taxpayer to say that they did not admit having committed tax fraud, but wished to cooperate with HMRC. That third option was known as the “Cooperative Denial Route”. HMRC claim that option created uncertainty and confusion in the minds of recipients of COP 9, and they have therefore now withdrawn the Cooperative Denial Route option, as of 1 July 2014.
HMRC have also taken the opportunity to modernise some key terms and bring them into line with recent legislation. Whilst the CDF is still only offered to taxpayers where HMRC suspect tax fraud, the taxman has reduced the use of the term “fraud” in COP9, as that is redolent of criminal cases. As Code Of Practice 9 is intended to lead to a civil settlement (i.e. the payment of tax, interest and tax-geared penalties) rather than a prosecution, HMRC have now clarified that the behaviour which needs to be disclosed relates to errors in tax returns which were brought about by “Deliberate” behaviour. Deliberate behaviour, along with “Deliberate behaviour with concealment” leads to the highest penalty charges available to HMRC: e.g. up to 200% of the underpaid tax where certain offshore bank accounts are held. Establishing Deliberate behaviour also allows HMRC to collect tax for the previous 20 years. However, HMRC still reserve the right to prosecute in cases of incomplete COP 9 disclosures – in which case they would be reasserting that the behaviour related to tax fraud.
Overall, these do not amount to any fundamental changes to the Contractual Disclosure Facility process. However, it does remove one opportunity to enter into discussions with HMRC rather than choosing one of the two more black and white options of an outright denial or a complete disclosure. It has therefore become all the more important for taxpayers to make the right decision within the crucial 60 day window of receiving a CDF offer from HMRC. In order to do so HMRC’s policy lead for civil investigation of fraud advises. “If a client receives an offer of CDF and the adviser is not familiar with the COP9 process, HMRC suggests that advice is sought from an agent who specialises in this area.”
What does this mean for me?
If you receive a Contractual Disclosure Facility HMRC’s Code Of Practice 9 (“HM Revenue & Customs investigations where we suspect tax fraud”) it means that HMRC believe they have very strong evidence that you have committed a prosecutable tax fraud. Nevertheless, they are giving you the opportunity to avoid prosecution by making a full disclosure. You have got 60 days to decide whether you want to cooperate with the CDF process. If you do not cooperate and HMRC subsequently prove that you have committed tax fraud, then they are very likely to prosecute you. That can lead to a prison sentence and also to the confiscation of your assets, along with publication of your details. It is therefore crucial that you obtain specialist advice immediately on receipt of a COP9.
How can Lynam Tax Fraud Investigation Experts help me?
Lynam Tax Enquiry Experts have vast experience of successfully dealing with COP9 investigations and CDF cases; relieving their clients’ stress and negotiating optimum outcomes. We can help you save tax, interest and penalties. We can save you years of stress, worry and disruption. And we can help you avoid a criminal investigation.
Nb. If you, or your client, have received an HMRC Code of Practice 9 you need specialist help now. Do not delay.
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