On 14th June 2023, HMRC released an updated policy statement on Code of Practice 9.

What is Code of Practice 9?

HMRC use their discretion to pursue a criminal investigation with a view to prosecution where they consider it necessary and appropriate. Code of Practice 9, or “COP 9”sets out how HMRC will investigate and prosecute cases of tax fraud. It applies to all cases where HMRC suspects fraud, although it is usually confined to suspicions of serious fraud. It is not designed to deal with straightforward reporting errors or avoidance schemes where there is no fraud element and it is only relevant to tax payers who are willing to admit the offence. HMRC’s Fraud Investigation Services (FIS) team undertake the procedure under the Contractual Disclosure Facility (CDF), which replaced the civil investigation of fraud procedures. It is an alternative to criminal prosecution and COP9 sets out the terms under which HMRC engage with a tax payer in this respect. In very brief summary, the recipient of COP9 is given an opportunity to make a complete, accurate, open and honest disclosure of:

• all their deliberate behaviour bringing about a loss of tax or duty, or payment administered by HMRC, (hereafter “deliberate behaviour”) and
• all other irregularities in their tax affairs (including those arising from non-deliberate behaviour, such as careless errors and errors made despite taking reasonable care)

In return, HMRC commits not to open a criminal investigation. This is called the Contractual Disclosure Facility (CDF). If the tax payer fails to meet their obligations under the CDF, or they provide HMRC with false or misleading information, HMRC may commence a criminal investigation with a view to prosecution. Separate guidance explains HMRC’s criminal investigation policy.

What are the highlights in the policy statement?

The use of technology in investigations

HMRC is increasingly using technology to investigate tax fraud, such as data analytics and artificial intelligence. It means that HMRC will be able to identify patterns of behaviour that may indicate tax fraud, even if the taxpayer has not made any mistakes on their tax return. Guidance sets out how HMRC will use this technology and how taxpayers can protect themselves.

The use of informants

HMRC may use informants to provide information about tax fraud. Their guidance sets out how informants will be treated and how they engage formally / informally with various third parties in the gathering of information in a CDF process.

The use of protective sanctions

In addition to criminal prosecution, HMRC may also use civil sanctions to punish tax fraud. If a tax payer attempts to avoid paying their liabilities or if they attempt to dissipate their assets, HMRC will consider other action to make sure they are able to collect the money they believe is owed. The actions can include:

• personal bankruptcy
• compulsory liquidation
• appointment of interim receivers or provisional liquidators
• obtaining civil freezing orders over bank and financial accounts
• registering legal cautions over property
• requiring the tax payer to give an amount of financial security, for any tax regime for which securities legislation exists.
• obtaining of account freezing orders

What should taxpayers do if they think they are being investigated for tax fraud?

If you think you are being investigated for tax fraud, you should seek professional advice immediately. A specialist lawyer can help you understand your rights and options and can represent you in any dealings with HMRC. JMW engage with tax experts and other professionals in protecting your interests at any stage of a CDF process, or in the event of a criminal investigation. This includes advice and representation at court if necessary in the event that HMRC resort to protective sanctions.

You can find more information about Code of Practice 9 and the updated policy statement on the HMRC website.