Code of Practice 9
It is HMRC’s policy to deal with fraud by use of the cost effective civil fraud investigation procedures under Code of Practice 9 wherever appropriate. It is easier to explain where HMRC will open a criminal investigation, leaving the balance of cases open to the civil fraud procedures.
Whilst HMRC reserves complete discretion to conduct a criminal investigation in any case and to carry out these investigations across a range of offences and in all the areas for which the Commissioners of HMRC have responsibility, there are published circumstances where HMRC will open a criminal investigation. In addition to those listed, HMRC reserves criminal investigation for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate. HMRC is also clear that where they believe that a taxpayer has not co-operated fully and honestly with a civil investigation, they will switch to criminal investigation.
Examples of the kind of circumstances in which HMRC will generally consider starting a criminal, rather than civil investigation are:
- In cases of organised criminal gangs attacking the tax system or systematic frauds where losses represent a serious threat to the tax base, including conspiracy
- Where an individual holds a position of trust or responsibility
- Where materially false statements are made or materially false documents are provided in the course of a civil investigation
- Where, pursuing an avoidance scheme, reliance is placed on a false or altered document or such reliance or material facts are misrepresented to enhance the credibility of a scheme
- Where deliberate concealment, deception, conspiracy or corruption is suspected
- In cases involving the use of false or forged documents
- In cases involving importation or exportation breaching prohibitions and restrictions
- In cases involving money laundering with particular focus on advisers, accountants, solicitors and others acting in a ‘professional’ capacity who provide the means to put tainted money out of reach of law enforcement
- Where the perpetrator has committed previous offences or there is a repeated course of unlawful conduct or previous civil action
- In cases involving theft, or the misuse or unlawful destruction of HMRC documents
- Where there is evidence of assault on, threats to, or the impersonation of HMRC officials
- Where there is a link to suspected wider criminality, whether domestic or international, involving offences not under the administration of HMRC
When considering whether a case should be investigated using the civil fraud investigation procedures under Code of Practice 9 or is the subject of a criminal investigation, one factor will be whether the taxpayer(s) has made a complete and unprompted disclosure of the offences committed.
There are certain fiscal offences where HMRC will not usually adopt the civil fraud investigation procedures under Code of Practice 9.
Examples of these are:
- VAT ‘Bogus’ registration repayment fraud
- organised Tax Credit fraud
There is not a minimum amount of tax involved for a criminal investigation to start.
The civil fraud route
It is very clear that a taxpayer accused of serious fraud by HMRC would wish to go down the civil fraud route. Criminal investigation carries a real risk of imprisonment, as well as fines and asset seizure. So a civil fraud investigation properly managed, does have some “benefits”.
- It’s not a criminal investigation. A criminal prosecution is undoubtedly the worst-case scenario, but under COP 9 you have a guarantee that HMRC will not seek to prosecute any irregularities disclosed to them under the process. That includes irregularities which they did not suspect at the outset. If you have been offered Code of Practice 9, the only reason why you would ever face prosecution is if you have made ‘materially false statements or materially false documents are provided with intent to deceive in the course of a civil investigation’.
So, the good news is that whether or not you get prosecuted is entirely in your own power. If you make a full disclosure to the best of your knowledge you have no fear of prosecution.
- The disclosure process is in your hands. If you decide to co-operate with HMRC under the COP 9 procedure, you will be given time to produce a full disclosure report which you will certify as your full disclosure under the process. If the report progresses to a satisfactory timetable and quality, HMRC will leave you and your adviser to get on with producing the report. Subsequent settlement negotiations will be conducted by your adviser and it is not even necessary for you to meet with HMRC for the final settlement meeting if you don’t want to (our clients invariably don’t).
A properly handled COP 9 disclosure will therefore result in very little direct contact between you and HMRC, thus reducing the stress upon you. With an experienced adviser on board the whole process can be surprisingly civilised, given that you are being investigated for suspected serious fraud by HMRC’s elite inspectors.
- Things can be dealt with quickly when handled expertly. Compared with the alternative – a long drawn out investigation by HMRC – COP 9 investigations can be dealt with relatively quickly, thus enabling you to put the experience behind you and move on.
- Penalty discounts are maximised. By getting onto the front foot with the disclosure process you will obtain the maximum benefit of the penalty discounts available. This will amount to a sizeable proportion of tax based penalty involved and that saving will recoup the cost of using an experienced specialist.
How Covertax can help you
We have many years’ experience in dealing with Civil Fraud investigations. In dealing with so many investigations we have developed our methodology, which combines technical expertise with our own brand of personal service and support for our clients through what is always a trying experience.