HMRC has substantially rewritten its Code of Practice 9 (COP 9), under which its Fraud Investigation Service deals with suspected cases of tax evasion, fraud or dishonesty, using its civil investigation powers. The point of COP 9 is that it gives taxpayers an opportunity to disclose tax fraud, and pay any tax and penalties, under a civil regime rather than potentially facing criminal charges.
Although much of the wording has been refreshed, HMRC has highlighted the following changes (via Agent Update 109):
guidance on the Contractual Disclosure Facility (CDF) has been updated, to make it clear to COP 9 recipients that the CDF is an alternative to criminal investigation; and
the terms of the CDF contract have been revised to make sure the recipient is clear on exactly what they are signing up to, including the consequences of non-compliance.
The following new guidance has also been added to section 8:
circumstances in which a civil COP 9 case can escalate to criminal investigation and ultimately to prosecution; and
steps HMRC can take following the reversal of an admission of deliberate behaviour by a COP 9 recipient after having accepted a CDF offer.
Updated guidance on using the Contractual Disclosure Facility clarifies that, so long as the taxpayer complies with the terms of the CDF contract, including making a full disclosure of deliberate behaviour that resulted in a loss of tax, HMRC will not criminally investigate with a view to prosecuting that deliberate behaviour.
However, the changes have alarmed some advisers.
COP 9 specialist Tori Magill (of Good Cop 9 Ltd) said: ‘The revision that causes most concern is the potential widening of scope of the COP 9 through the amended definition of tax fraud. The new COP 9 policy paper states that it is possible for an individual to commit tax fraud in respect of tax owed by another and without personally making any gain. Previously, the COP 9 tax fraud definition following the equivalent criminal offence terminology and was simply summarised as “dishonest behaviour that led to or was intended to lead to a loss of tax”. This has been clarified as “any dishonest deliberate behaviour that exposes HMRC to a risk of loss of Revenue”.’
Tax investigations adviser Anthony Monger raised separate concerns over the requirement that taxpayers must now personally attend any meetings with HMRC if HMRC so requests. ‘I have had a number of cases over the year where the client’s physical or mental health has been such that a meeting was undesirable – for example, a client with onset Alzheimer’s who was concerned that he would not be able to recall details accurately, and a client with a terminal illness whose doctors had serious concerns regarding his ability to cope with the stress of a meeting,’ he said. ‘In these instances, we have explained the issue to HMRC (with supporting evidence to substantiate the concerns) who have kindly agreed to forego the opening meeting. HMRC might not realise that clients have to be coaxed and supported throughout the COP 9 process and the insistence upon an opening meeting might well deter some clients from making a disclosure altogether.’
'I appreciate that HMRC has the option to carry out a criminal investigation,' Monger said, 'but it really needs to consider (a) whether it would really be able to identify these people if they did not voluntarily come forward; (b) whether it has the staff and resources to conduct these investigations; and (c) the likelihood of a successful prosecution if the taxpayer is elderly, unwell or terminally ill. This proposal does not seem to have been thought through particularly well.'
HMRC has substantially rewritten its Code of Practice 9 (COP 9), under which its Fraud Investigation Service deals with suspected cases of tax evasion, fraud or dishonesty, using its civil investigation powers. The point of COP 9 is that it gives taxpayers an opportunity to disclose tax fraud, and pay any tax and penalties, under a civil regime rather than potentially facing criminal charges.
Although much of the wording has been refreshed, HMRC has highlighted the following changes (via Agent Update 109):
guidance on the Contractual Disclosure Facility (CDF) has been updated, to make it clear to COP 9 recipients that the CDF is an alternative to criminal investigation; and
the terms of the CDF contract have been revised to make sure the recipient is clear on exactly what they are signing up to, including the consequences of non-compliance.
The following new guidance has also been added to section 8:
circumstances in which a civil COP 9 case can escalate to criminal investigation and ultimately to prosecution; and
steps HMRC can take following the reversal of an admission of deliberate behaviour by a COP 9 recipient after having accepted a CDF offer.
Updated guidance on using the Contractual Disclosure Facility clarifies that, so long as the taxpayer complies with the terms of the CDF contract, including making a full disclosure of deliberate behaviour that resulted in a loss of tax, HMRC will not criminally investigate with a view to prosecuting that deliberate behaviour.
However, the changes have alarmed some advisers.
COP 9 specialist Tori Magill (of Good Cop 9 Ltd) said: ‘The revision that causes most concern is the potential widening of scope of the COP 9 through the amended definition of tax fraud. The new COP 9 policy paper states that it is possible for an individual to commit tax fraud in respect of tax owed by another and without personally making any gain. Previously, the COP 9 tax fraud definition following the equivalent criminal offence terminology and was simply summarised as “dishonest behaviour that led to or was intended to lead to a loss of tax”. This has been clarified as “any dishonest deliberate behaviour that exposes HMRC to a risk of loss of Revenue”.’
Tax investigations adviser Anthony Monger raised separate concerns over the requirement that taxpayers must now personally attend any meetings with HMRC if HMRC so requests. ‘I have had a number of cases over the year where the client’s physical or mental health has been such that a meeting was undesirable – for example, a client with onset Alzheimer’s who was concerned that he would not be able to recall details accurately, and a client with a terminal illness whose doctors had serious concerns regarding his ability to cope with the stress of a meeting,’ he said. ‘In these instances, we have explained the issue to HMRC (with supporting evidence to substantiate the concerns) who have kindly agreed to forego the opening meeting. HMRC might not realise that clients have to be coaxed and supported throughout the COP 9 process and the insistence upon an opening meeting might well deter some clients from making a disclosure altogether.’
'I appreciate that HMRC has the option to carry out a criminal investigation,' Monger said, 'but it really needs to consider (a) whether it would really be able to identify these people if they did not voluntarily come forward; (b) whether it has the staff and resources to conduct these investigations; and (c) the likelihood of a successful prosecution if the taxpayer is elderly, unwell or terminally ill. This proposal does not seem to have been thought through particularly well.'
