What is Code of Practice 9?
Where HM Revenue & Customs (HMRC) believe that a taxpayer has deliberately tried to pay less than the correct amount due or has taken advantage of a tax avoidance scheme, they will make a challenge.
Where HMRC suspects that fraud has been committed by a taxpayer, they will first consider if it is in the public interest to prosecute. If it is not in the public interest to commence such criminal proceedings, HMRC’s Specialist Investigations team will investigate on a civil basis under Code of Practice 9.
If fraud is not suspected and the underpayment of taxes seems more likely to be a result of careless error or oversight, Code of Practice 8 will be issued instead.
What is HMRC looking for?
Specialist Investigations will write to any taxpayer enclosing the booklet entitled Code of Practice 9 telling them that they are under investigation. However, HMRC are not obliged to tell a taxpayer why they are under investigation.
The taxpayers concerned may have been investigated by Specialist Investigations for some time before any direct approach is made to the taxpayer or adviser. Previously submitted returns as well as other information and documentation maybe collated and reviewed before the decision to issue Code of Practice 9 is taken.
The issues being investigated under Code of Practice 9 will invariably span a number of years and will cover all the entries on a Tax Return. This will include any entry that HMRC believes should be on the Tax Return but has been deliberately omitted.
What happens next?
Code of Practice 9 investigations are normally carried out under the Contractual Disclosure Facility. Typically the taxpayer will be required to submit a detailed Disclosure Report to explain all relevant matters quantifying any taxable amounts.
Any tax that is due will fall under what is called a Settlement, and will include all the tax, interest and penalties for all years concerned.
A Letter of Offer will be sent to HMRC by the taxpayer in lieu of any further proceedings being taken against the taxpayer. A Time to Pay agreement can form part of any agreed Settlement.
If you wish to discuss this or any other matter with a member of the team, please contact us.