COP9 investigations: what you need to know

If you’ve received a letter from HMRC under Code of Practice 9 (COP9), it means that HMRC suspects serious tax fraud. This is not a routine enquiry — it’s a formal civil investigation led by HMRC’s Fraud Investigation Service (FIS). While this is naturally a serious matter, there is the opportunity to resolve the matter without facing criminal prosecution — but only if they act quickly and strategically.

Below, Sarah Smith, Legal Director and Andrew Horsfield, Tax Director, both in our Corporate Defence and Compliance team, outline what to do if you’ve received a Code of Practice 9 (COP9) letter from HMRC. They explain the significance of the Contractual Disclosure Facility (CDF), why urgent action is essential and how strategic legal advice can protect both your liberty and your livelihood.

What is tax fraud?

Tax fraud is any dishonest deliberate behaviour in respect of a taxpayer’s liability to pay tax, duties or levies. This behaviour exposes HMRC to a risk of loss of revenue. It includes behaviour that might be prosecuted as cheating the public revenue, a statutory offence of fraudulent evasion of tax, or an offence of fraud. At its heart, it will involve dishonest behaviour that led to or was intended to lead to a risk of loss of tax. This includes lying to HMRC about facts relevant to the assessment and collection of tax (including concealing or withholding relevant facts or failing to disclose a liability), dishonestly and deliberately claiming repayments or reliefs to which one is not eligible, or dishonestly and deliberately paying less tax than is properly owed. 

A tax fraud requires dishonest deliberate behaviour — a tax fraud cannot be committed by accident. It is also possible for a taxpayer to commit tax fraud in respect of tax owed by another and without personally making any gain.

HMRC has functions that do not relate to tax. For example, HMRC is responsible for paying some types of targeted financial support. HMRC may also use COP9 for the civil investigation of fraud where fraudulent claims have been made for these types of payments. 

What is the Contractual Disclosure Facility (CDF)?

COP9 investigations begin with an offer to enter into the Contractual Disclosure Facility (CDF). This is a legally binding agreement where:

• The taxpayer admits to deliberate behaviour that caused a tax loss. This includes the submission of documents to HMRC containing information that a person submitting knew was incorrect, and/or they did not tell HMRC at the right time about information that they knew was relevant to a liability to tax or duty, and/or they made a claim for a payment from HMRC to which they knew they were not entitled.
• The taxpayer agrees to make a full and honest disclosure, including any additional tax irregularities which do not amount to deliberate behaviour (where errors have occurred).
• HMRC agrees not to pursue a criminal investigation, provided your disclosure is complete and truthful.

The taxpayer has 60 days from the date the letter is received, to respond. If the offer is ignored or rejected, HMRC may escalate the matter to a criminal prosecution.

Examples of what HMRC classes as deliberate behaviour include:

• Submitting false tax returns.
• Failing to declare offshore income.
• Claiming reliefs or allowances you knew you weren’t entitled to.
• Concealing assets or income.

If you accept the CDF, then you must:

• Submit an Outline Disclosure within 60 days.
• Cooperate with HMRC’s investigation.
• Prepare a detailed disclosure report.
• Pay any tax, interest, and penalties due.

Failure to comply or disclose fully may result in a criminal investigation being pursued, with the risk of criminal charges / proceedings being brought, where evidence permits.

What happens if you reject the CDF?

The CDF is not a compulsory process and can be rejected; many taxpayers reject CDF’s on the basis that they do not accept that fraud has been committed. HMRC commit to keeping an open mind as to the reasons for the rejection, including that there may be an innocent explanation for the behaviour that led HMRC to suspect fraud, and will consider any explanations / evidence offered. If upheld, a confirmation letter to this effect will be issued to the taxpayer.

Rejection of the CDF permits HMRC to continue with the civil investigation, and escalate it to a criminal investigation if they believe one is merited.

If no response is received within the 60-day window, HMRC will consider whether to open a criminal investigation.

Talk to us

Our Corporate Defence and Compliance team is led by Dan Stowers, a nationally recognised expert in tax fraud and regulatory investigations. 

Typically, our team will assess your position and advise on all options available to you, including whether to enter in to a CDF or pursue alternative routes. We will help you prepare a robust Outline Disclosure and full report, working with forensic accountants and our internal tax advisors, where applicable — managing all communications with HMRC to protect your legal and financial interests. Where appropriate, we also advise on reputational risks — coordinating media and stakeholder communications.

In addition to our COP 9 offering, our specialist tax team offers advice on a range of matters, including disputes or challenges with HMRC. We can provide proactive tax advice before issues arise. Any concerns that you have, we would recommend early discussion. In the event that litigation cannot be avoided, our tax lawyers can assist you through any Tax Tribunal. 

If you need guidance, give us a call on 0333 004 4488, email us at hello@brabners.com or complete our contact form below.