Last updated on April 13th, 2015 at 02:31 pm
I consider myself a typical small business owner and as such recognise that I have to have a passing knowledge of lots of subjects (while knowing that there are experts I can turn to if there is something I’m not sure about or have no knowledge of).
Recently I was talking to a friend and they mentioned the HMRC Code of Practice 9: Civil Investigation of Fraud (COP9). This was a new idea to me as I thought that if you were investigated for fraud by the HMRC that this was a criminal matter and not a civil one. Because it was something that I’d not heard of, and being the kind of business owner that doesn’t appreciate having surprises sprung on me I decided to investigate it a little more.
It seems that where there are substantial tax irregularities and that HMRC suspect serious fraud may have taken place (where the under-declared tax + interest + penalties are likely to generate more than £75,000) that the HMRC can decide to investigate using a civil fraud procedure where they will not seek a prosecution for the tax fraud that is covered by the investigation. However if during the course of the investigation false statements are made or false documentation is submitted HMRC reserve the right to prosecute that conduct. If you are facing a “code of practice 9” investigation you should have been given a copy of this statement and you need to contact your accountant as soon as possible.
Unlike many tax investigations, where you may be dealing with a local tax inspector, COP9 investigations are carried out by one of two specialist departments in the HMRC, both of these departments (the Civil Investigation of Fraud Unit & the Specialist Investigations Team) are staffed by highly trained and experienced tax fraud investigators, and cover all elements of tax including Income Tax, Corporation Tax, Capital Gains Tax (CGT), PAYE and VAT.
The advantage of a COP9 investigation seems to be that it gives the person being investigated the chance to avoid prosecution in the courts and helps reduce the penalties being applied however it does require that at the first meeting with the tax investigators you are asked if you have anything to disclose, and if you say yes you are committed to produce something called a Full Disclosure Report. This report should cover :
The HMRC will agree a timetable for producing this report at the meeting. In most cases they would expect the disclosure report to be submitted within six months of the opening meeting. Having said that, the timetable will vary according to the complexity of the case and volume of work required, for example in more straightforward cases the report could be submitted considerably sooner.
As you will see from the above, there are serious deadlines involved with possibly a lot of back tax to be paid. It is strongly recommended that you talk to an accountant as soon as you get the letter from HMRC inviting you to a meeting or telling you that they are going to launch an investigation – this saves you from not telling the investigators something that you should at the first meeting and getting yourself into deeper trouble. If you do not have an accountant or use one that is not experienced in COP9 investigations then there are firms of accountants that specialise in these with one such firm being Turpin Barker Armstong who are based in Sutton, Surrey.