The Nature of Tax Fraud

Published: Monday, May 13, 2024

When HMRC sends a COP9 letter, it provides the recipient an opportunity to make a complete disclosure of the activity, deliberate or otherwise, that have raised suspicions of tax regularities. If HMRC consider that the recipient has failed to make full and accurate disclosure, they may initiate criminal proceedings. In this news post, I'll delve into the COP 9 procedure and its implications.

The Nature of Tax Fraud | COP9

Tax fraud arises from behaviour which is both deliberate and dishonest but does not encompass accidental error.

A number of criminal offences may be committed, such as:

Cheating the Public Revenue, contrary to common law and

Fraud under the Fraud Act 2006.

HMRC provides guidance as to conduct regarded as deliberate such as when:

‘a person submits documents to HMRC containing information that they knew was incorrect, and/or they did not tell HMRC at the right time about information that they knew was relevant to a liability to tax or duty, and/or they made a claim for a payment from HMRC to which they knew they were not entitled’.

HMRC needs only prove that the conduct resulted in a potential risk of tax loss as opposed to any real financial loss.

Conduct of a COP 9 Investigation

A COP9 procedure undertaken by HMRC is a civil investigation into suspected fraudulent activity, particularly in relation to Tax Fraud.

Under the COP9 procedure, HMRC offers an opportunity to make complete, honest and accurate disclosure by the issue of a Contractual Disclosure Facility (‘CDF’).

The recipient of a CDF has sixty days to comply with two disclosure stages commencing with a valid ‘Outline Disclosure’ of the deliberate conduct resulting in a tax loss.

This Outline Disclosure is followed by a ‘Certified Statement’ in which it is confirmed that a full, complete and accurate disclosure of all other irregularities has been made accompanied by certified statements of assets, liabilities, all bank statements and credit cards, known as ‘Formal Disclosure’.

In straightforward cases, where the Outline Disclosure simply confirms HMRC suspicions, HMRC will, inter alia, seek to agree any additional duties, interest payable and any penalty.

In complex cases, a ‘Disclosure Report’ may be prepared outlining, inter alia, how all irregularities, deliberate or not, have been quantified and the nature of all tax, duties and penalties due, together with a Certified Statement of all assets of a worldwide nature.

Once the CDF is in place HMRC gives an assurance that it will not proceed with a criminal investigation into irregularities into the recipient’s tax affairs unless there is cause to do so.

Once figures are agreed with HMRC in regard to amounts due in tax/duties, interest and penalties, this by reference to the reports submitted and these amounts have been paid, that should be the end of the process.

HMRC Criminal Investigation

HMRC may start a criminal investigation where:

an offer made under a CDF is rejected,

an acceptance letter is submitted but there is no valid Outline Disclosure,

incomplete Outline Disclosure is made,

false statements are made,

any false material documents are submitted.

General Points for Consideration

A CDF is only suitable to those who admit to having created a tax loss by deliberate conduct, wish to make a full disclosure of that tax loss, will work with HMRC to put their tax affairs in order, and pay tax, interest and penalties in order to do so.

If the recipient does not believe that a loss of tax has occurred through deliberate conduct, a ‘CDF Rejection Letter’ may be served within sixty days whereafter HMRC will start its own investigation which may involve a criminal investigation and the Rejection Letter may be used in court or tribunal proceedings as evidence.

COP 9 only applies to HMRC investigations and does not prevent other law enforcement agencies issuing proceedings for the offences in question. Additionally, a CDF will require detailed and concise disclosure of relevant information and a failure to disclose evidence, even when an individual may honestly believe the information is irrelevant, may still leave them liable to criminal prosecution on matters undisclosed.

HMRC may elect to publish details of deliberate defaulters as an exception to the general rule of confidentiality in taxation. A recipient of a COP9 may be able to avoid such publication upon the discretion of HMRC in circumstances where there is full co-operation.

Should HMRC seek to initiate criminal proceedings, despite co-operation with a CDF, it is likely that any attempted prosecution would be defeated by way of an Abuse of Process Application based upon the HMRC promise not to prosecute. In R v Abu Hamza, Lord Phillips CJ laid down the following test to determine whether a breach of prosecutorial promise was an abuse of process:

‘…it is not likely to constitute an abuse of process to proceed with a prosecution unless:

there has been an unequivocal representation by those with the conduct of the investigation or prosecution of a case that the defendant will not be prosecuted and

that the defendant has acted on that representation to his detriment. Even then, if facts come to light which were not known when the representation was made, these may justify proceeding with the prosecution despite the representation.’

How we can help our clients

HMRC itself advises that before accepting or rejecting a COP 9 offer, legal advice/assistance should be sought. This is because, as noted above, cooperation within a COP 9 constitutes an admission to deliberate and dishonest behaviour.

Accordingly, should you receive any communication of any nature, including one containing an offer of a COP 9 from HMRC, you should seek immediate assistance. COP 9 offers and contracts can be complicated and the consequences severe.

As noted above, time restraints apply and it is important to react quickly in order to allow adequate time to consider your options and seek clear and concise legal advice.

The Team at KANGS solicitors offers vast experience in matters relating to Tax and Fraud investigations and proceedings and would be delighted to assist you, simply contact us using the details below:

info@kangssolicitors.co.uk

0333 370 4333

Hamraj Kang

Kangs Solicitors

Country:

England, UK

Practice Area:

Fraud

Website:

kangssolicitors.co.uk

Phone Number:

020 7936 6396

Email:

hkang@kangssolicitors.co.uk

Fax:

N/A

Hamraj acts for corporate and individual clients in investigations brought by the major UK law enforcement agencies including the SFO, HMRC, FCA, NCA, CMA, CPS, BEIS, ICO, Trading Standards and a wide range of regulatory bodies. He has particular expertise in HMRC investigations and prosecutions including MTIC & VAT fraud, money laundering, tax & duty evasion and regularly conducts cases throughout the country. There are few solicitors nationally who can match Hamraj’s experience of complex multi-million pounds MTIC and VAT fraud cases as he acted in many such cases in his career. He has considerable expertise in the areas of money laundering, bribery & corruption and insider dealing, having been instructed by a number of PLCs and senior company executives on such matters. The work is often complex, multi-jurisdictional and necessitates overseas travel which has led to Hamraj working in numerous overseas jurisdictions. Hamraj advises corporate and individual clients both during and in the immediate aftermath of a dawn raid when quick, effective and incisive advice is required to protect the legal rights and reputation of the client. He has considerable experience of representing clients in interviews with all the leading law enforcement agencies including the SFO, HMRC and the NCA. He is admired for his novel tactical thinking and possesses a proven track record of guiding clients to a successful conclusion in many difficult and demanding cases. As a result of working on high profile and complex fraud cases, Hamraj’s client base is both national and international ranging from publicly listed companies to individual clients. Due to his expertise and experience in international financial crime investigations, Hamraj is also instructed in complex extradition cases often with a financial crime background involving allegations such as money laundering, wire fraud, bribery and corruption. He accepts instructions involving all jurisdictions but most notably the USA, Russia, CIS countries, India, Pakistan, Africa, the Caribbean, South America and the Far East. Civil Fraud & Asset Recovery In addition to criminal fraud, Hamraj advises in relation to civil fraud matters acting for both claimants and defendants. His clients range from large corporations to private individuals with the work often including early action and interim reliefs. The areas of work include: Cryptocurrency disputes The conduct of internal investigations on behalf of corporate clients Obtaining and responding to freezing orders Obtaining and responding to search orders Norwich Pharmacal orders Receivership orders The civil fraud and asset recovery High Court litigation for claimants and defendants includes allegations of fraudulent misrepresentation, breach of fiduciary and directors’ duties, unjust enrichment, unlawful means conspiracy, bribery, deceit, carousel/MTIC fraud, boiler room fraud and bogus investment schemes. Civil Recovery | POCA Hamraj is recognised by Chambers UK as a leading lawyer in the area of proceeds of crime and asset forfeiture, being one of only six solicitors ranked in Band 1 in the country. His work includes civil recovery proceedings under Part 5 of POCA such as Property Freezing Orders, Civil Recovery Orders and Account Freezing Orders. Hamraj is also able to advise in relation to Interim Freezing Orders and Unexplained Wealth Orders. HMRC Tax Investigations | Tax Tribunals There is often a considerable overlap between criminal and civil fraud proceedings and HMRC civil tax investigations. Hamraj regularly advises both corporate and individual clients in relation to HMRC civil tax investigations, VAT Assessments including Kittel Assessments as well as COP8 & COP9 investigations. The work includes representation before the First-tier Tax Tribunal and the Upper Tribunal in relation to VAT Assessments, Kittel VAT Notices, Direct Tax Appeals, Personal Liability Notices, Condemnation Proceedings and Excise Duty matters. Disciplinary | Regulatory | Sports Work Hamraj has represented a number of professionals facing criminal and regulatory allegations including accountants and other financial professionals, solicitors, doctors, dentists and pharmacists. He has developed an excellent understanding of the regulatory framework and codes of professional conduct governing the professions. In recent years, Hamraj has successfully represented a number of solicitors in serious criminal fraud prosecutions and achieved their acquittal which has resulted in a successful outcome in associated SRA disciplinary proceedings. Hamraj has represented many individuals from the sporting world (mainly football, cricket, horse racing and boxing) and is regularly instructed by a number of Premier League and Championship Football Clubs. Serious Criminal Work Hamraj also undertakes serious criminal work such as historic sexual allegations, murder, corporate manslaughter, drugs offences and serious driving offences, having acted in many high-profile cases of this nature. Clients include football clubs, members of the professions, company executives and public figures from the world of entertainment, politics, media and sport. Hamraj places the issues of confidentiality, privacy and reputation management at the forefront of his strategy when conducting cases. Matters are dealt with the utmost sensitivity and complete discretion. He always adopts a strong and proactive approach to investigations with the overriding objective to bring each matter to a successful and swift conclusion, and where possible, to avoid court proceedings and any adverse publicity for his client.

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