In recent months, HMRC has started to take more of an aggressive stance against certain tax planning schemes, particularly those involving EBTs and EFRBS.
What have HMRC done?
HMRC have issued opening investigations under Code of Practice 9 (cases of suspected tax fraud) to numerous participants of certain arrangements, stating in the first paragraph of their letter “I am writing to you because I have reason to suspect you have committed tax fraud. I enclose a copy of Code of Practice 9 (COP9).”
What is a Code of Practice 9 (COP9) Investigation?
A Code of Practice 9 (COP9) investigation (also known as the Contractual Disclosure Facility – CDF) is issued by HMRC, when they suspect an individual has committed a deliberate or fraudulent act in not reporting income or gains to HMRC.
It should be noted that a COP9 investigation is a civil process and guarantees that HMRC will not undertake a criminal investigation in return of full cooperation and full disclosure.
For instance, in tax planning arrangements, HMRC may interpret certain documentation in their possession as meaning that the individual knew that the arrangements would not be effective for tax purposes and hence decided that a COP9 investigation should commence.
How to respond to the COP9 Offer?
Upon receipt of a COP9 investigation, individuals have up to 60 days to respond to HMRC’s Contractual Disclosure Facility. It is worth highlighting that the issue of the COP9 may either have nothing to do with the tax planning or there may be another issue where HMRC suspects the individual has committed a deliberate or fraudulent act. Either way, it is important to consider the past 20 years (HMRC’s maximum assessing period) in order that the correct response is submitted to HMRC.
Haven’t we seen this approach before?
Yes we have. HMRC have utilised this approach several years ago, when investigating certain tax planning arrangements via a promoter of certain tax products. At the time it was seen as a heavy handed approach in order to reach a monetary settlement regarding the tax owed.
What should you do if you receive a COP9 investigation?
At BKL we have the relevant experience to assist and guide you through the whole COP9 process. We will also discuss with you whether we feel HMRC are being heavy handed in their approach to matters and how we can deal with this through HMRC’s complaints process.
If individuals wish to discuss matters surrounding the receipt of a Code of Practice 9 investigation, then please get in touch with your usual BKL contact or use our enquiry form.
