In June of this year HMRC issued a revised Code of Practice 9 (COP9). The initial reaction in the tax press focused mainly on the new emphasis on in person meetings. Advisers might have been forgiven for seeing this as a simply a return to older ways, a ‘moving on’ from the world of the pandemic and Zoom/Teams. However, HMRC’s ongoing review of COP9 is much broader than this, and it would be best to consider what has driven it.

HMRC has recognised both that COP9 plays a fundamental role in tax compliance and that , for a number of reasons, its effectiveness has been diluted in recent years. An internal HMRC review commenced in 2023, aimed re-establishing COP9 as a robust process for the civil investigation of tax fraud underpinned by the threat of criminal prosecution. June’s update was quickly followed by the publication of HMRC commentary and engagement with the tax profession. It is understood that the review of COP9 will continue and it is possible that HMRC may consider further changes to the framework. In the meantime, HMRC’s revised approach has already led to change:

• HMRC’s Offshore Corporate & Wealthy directorate has taken on the lead role for COP9 oversight. This will impact both investigation selection, and case management;

• There is a new emphasis on tax payment, and it is understood that HMRC is concerned that people have been using COP9 to avoid prosecution without also paying what was owed. HMRC’s is now intent on making full use of civil recovery powers and insolvency action where necessary;

• HMRC has made clear that where an individual attempts to use COP9 as an opportunity to avoid criminal prosecution, but subsequently rescinds any admission of deliberate conduct, HMRC may not consider itself bound by any ‘agreement ‘ under COP9, so the risk of criminal investigation will remain;

• Voluntary disclosure is recognised as playing a key role, and any changes to both the COP9 and Contractual Disclosure Facility (CDF) frameworks will be designed so as to facilitate this;

• Most importantly, what HMRC terms the ‘criminal underpin’ will be enforced throughout the entirety of an investigation, not just at its outset. The revised COP9 makes clear that the risk of a criminal investigation will remain until a satisfactory disclosure is made, and a settlement approved by HMRC.

HMRC’s review of COP9 is continuing and there may be further developments in Q4 of 2023. The COP9 process remains an opportunity to put things right and, if well handled, is often the best framework for taxpayers to resolve deliberate tax understatements. However, where the opportunity to make full disclosure is not taken, or a COP9 is mishandled, it is clear that the risks of criminal prosecution are increasing.