COP9 since 2023
In June of 2023 HMRC issued a revised Code of Practice 9 (COP9). The initial reaction in the tax press focused mainly on the new emphasis on in person meetings. Advisers might have been forgiven for seeing this as a simply a return to older ways, a ‘moving on’ from the world of the pandemic. However, HMRC’s review of COP9 was broader than this, and it would be best to consider what drove it.
HMRC recognised both that COP9 plays a fundamental role in tax compliance but that , for a number of reasons, its effectiveness had been diluted in recent years. An internal HMRC review took place in 2023, aimed re-establishing COP9 as a robust process for the civil investigation of tax fraud underpinned by the threat of criminal prosecution. This review was followed by the publication of HMRC commentary and engagement with the tax profession. It is understood that the review of COP9 may be revisited , but for the time being HMRC’s approach since 2023 has led to changes in practice:
There is a new emphasis on both demonstrating cooperation and on tax payment. The 2023 changes addressed HMRC concerns that people had been using COP9 to avoid prosecution without also paying what was owed. HMRC’s is now intent on making full use of civil recovery powers and insolvency action where necessary;
Meetings: In HMRC’s view, if the taxpayer is asked to attend a meeting by HMRC, then they must attend. This is regarded by HMRC as being a necessary condition of COP9;
HMRC has made clear that where an individual attempts to use COP9 as an opportunity to avoid criminal prosecution, but subsequently rescinds any admission of deliberate conduct, HMRC may not consider itself bound by any ‘agreement ‘ under COP9, so the risk of criminal investigation will remain;
Voluntary disclosure is recognised as playing a key role, and any changes to both the COP9 and Contractual Disclosure Facility (CDF) frameworks will be designed so as to facilitate this;
Most importantly, what HMRC terms the ‘criminal underpin’ will be enforced throughout the entirety of an investigation, not just at its outset. The revised COP9 makes clear that the risk of a criminal investigation will remain until a satisfactory disclosure is made, and a settlement approved by HMRC.
The COP9 process remains an opportunity to put things right and, if well handled, is often the best framework for taxpayers to resolve deliberate tax understatements. However, where the opportunity to make full disclosure is not taken, or a COP9 is mishandled, it is clear that the risks of criminal prosecution are increasing.
