Code of Practice 9 (COP9) / Contractual Disclosure Facility (CDF)
Where HMRC suspect tax fraud or tax evasion they can pursue matters either via a criminal investigation or along civil lines.
To the extent that HMRC proceed along a civil process, the investigation will be conducted in accordance with HMRC’s Code of Practice 9 (COP9) / Contractual Disclosure Facility (CDF).
In the past once HMRC had issued COP9 to an individual, they automatically received immunity from a criminal investigation for the tax offence. In cases where individuals did not cooperate in accordance with COP9, HMRC could not remove the immunity. Hence a new COP9 was issued in January 2012 and subsequently updated in June 2014 which sets out new conditions to secure immunity from a criminal investigation.
Once HMRC issue COP9, they will also offer an opportunity to disclose the nature of the tax fraud. This offer is known as the Contractual Disclosure Facility (CDF).
There are 2 options under the CDF:
- Accepting the offer (Owning up)
- Rejecting the offer (the denial route)
If an individual accepts the terms of the CDF and owns up to the tax fraud they have committed, then an outline disclosure setting out the full details of the tax fraud needs to be submitted to HMRC within 60 days of the offer of the CDF.
If an individual decides to take the denial route, then it is still possible to work with HMRC to ensure all taxes are correct and up to date; however, HMRC could commence a criminal investigation at any time.
Similarly, where an individual does not respond to the CDF offer, then HMRC could commence either a civil or a criminal investigation into the tax fraud they suspect of being committed.
Where the offer of the CDF is accepted by both parties, a request by HMRC to attend a meeting may be made. Whilst attendance at a meeting is not compulsory it will demonstrate engagement with the process.
In resolving matters, where the nature and extent of the tax fraud is straightforward, then it may be possible to conclude the CDF without preparing a formal disclosure report. However, in more complex cases, a report will be required to explain and support how the fraud has been committed.
The CDF route may also be appropriate in cases of voluntary disclosures of tax fraud.
For more information and to arrange a free initial consultation please contact Doug Sinclair.