HMRC and Fraud Investigations

There are various levels of HMRC investigation ranging from a simple phone call telling you that you have miscalculated your tax liability all the way to a criminal prosecution.

At the top of the list is Code of Practice 9 or COP9 for short. A COP9 is where HMRC write to you and tell you that they have information which suggests that at some point in the last 20 years you have committed tax fraud and if you tell them everything they promise not to criminally prosecute you – which is a fair compromise; money and honesty in exchange for freedom.

Just because you receive a COP9 letter does not mean that you have committed tax fraud – HMRC may have misinterpreted the information that they have.  Until recently you had three options:

1. Admit to having committed fraud and provide all of the details to HMRC
2. Reject the offer of a COP9 stating that you have nothing to declare
3. Reject the assertion that you have committed tax fraud but admit that you do have undeclared income and/or gains that you would like to disclose

By choosing option 1 you will avoid prosecution; assuming of course HMRC believe you.  If you chose option 2, HMRC will then consider if they wish to prosecute you.  They have no time limit for this and so it is a risky choice.  If you are able to chose option 3 – after all fraud cannot be carried out unknowingly – then this is the best of both worlds as you could avoid criminal prosecution, regularise your past errors whilst not having to admit to fraud which does of course have a knock on effect elsewhere in life.

Option 3 no longer exists.  HMRC have in their ‘wisdom’ taken it away.  This is worrying indeed as if you receive a COP9 letter but have not committed fraud you cannot get any assurance that HMRC will not prosecute you. HMRC say that if you have not committed fraud you do not need immunity from prosecution as there is nothing they can prosecute you for. That may be true, but it leaves the taxpayer in a precarious position as his view of fraud may not necessarily conform to HMRC’s.

If you do receive a COP9 letter, the first thing to do is not to panic.  You should contact us and get professional advice about how best to proceed.