What is the Contractual Disclosure Facility?

Receiving a Code of Practice 9 (COP9) letter from HMRC can be an extremely worrying experience.

The language used by HMRC can be unfamiliar and intimidating, particularly where the letter refers to deliberate behaviour, tax irregularities, the Contractual Disclosure Facility and potential criminal prosecution.
If you have received a COP9 letter, you may be wondering what you should do, what you need to disclose and whether you should deal with HMRC yourself.
You do not have to navigate a COP9 investigation alone.
Our COP9 specialists understand how difficult it can be to face an HMRC tax investigation of this nature. We can guide you through the CDF process, explain your options and help you understand what is required before you make important decisions about your disclosure.

What is the Contractual Disclosure Facility?

The Contractual Disclosure Facility (CDF) is offered by HMRC to individuals who are being investigated under Code of Practice 9 where HMRC suspects deliberate tax irregularities.

A COP9 investigation can involve suspected tax evasion, undeclared income, concealed assets, inaccurate tax returns, deliberate underpayment of tax, offshore income, undisclosed bank accounts or other deliberate tax irregularities.

The CDF provides an important opportunity for the taxpayer to make a full and complete disclosure to HMRC.
If the CDF is accepted and its conditions are complied with, the agreement provides contractual immunity from criminal prosecution for the tax fraud disclosed under the facility.

That protection is extremely important. However, it also means that the disclosure process must be approached carefully.
What is the 60-day COP9 deadline?

If you decide to accept the Contractual Disclosure Facility, HMRC normally gives you 60 days to provide an Outline Disclosure.
This deadline should not be underestimated.

The Outline Disclosure is not simply an informal explanation of what happened. It is a formal part of the COP9 process and needs to address the matters required by HMRC.

For someone unfamiliar with tax investigations, working out exactly what needs to be disclosed can be extremely difficult.
You may be asking yourself:

What does HMRC already know? What do I have to tell them? How far back do I need to go? What happens if I forget something? What if I am unsure about an old transaction?

These are precisely the types of questions that should be discussed with a COP9 specialist before you respond to HMRC.

Why getting specialist COP9 advice matters

A COP9 investigation is very different from an ordinary HMRC tax enquiry.

The potential consequences can include substantial tax liabilities, interest, financial penalties and, depending on the circumstances and how the investigation develops, criminal proceedings.

At the same time, many people receiving a COP9 letter have never experienced anything like this before. They may be completely unsure where to start.

Trying to interpret the CDF yourself, preparing an Outline Disclosure without specialist advice or making statements to HMRC before understanding the implications can create unnecessary risks.

Getting professional advice does not mean you have done something wrong. It means you are obtaining appropriate assistance to understand a serious and complex HMRC investigation.

What happens if you accept the CDF?

Once the CDF is accepted, the disclosure process requires you to provide HMRC with information concerning the deliberate tax irregularities covered by the agreement.

The objective is to establish the relevant facts, identify the tax years involved, calculate the tax lost and determine the tax, interest and penalties that may be payable.

The disclosure therefore needs to be complete, accurate and truthful.

If HMRC subsequently considers that information has deliberately been withheld or that the disclosure does not comply with the terms of the agreement, there can be serious adverse consequences.

This is why obtaining advice from a COP9 accountant or tax investigation specialist at an early stage can be so valuable.

You don’t have to deal with HMRC alone

If you have received a COP9 letter, it is understandable to feel overwhelmed.
You may not know whether to accept the CDF, what information HMRC is looking for, how much you could potentially owe or what you should say in response.

You do not need to work all of this out yourself.

Our COP9 specialists regularly help clients understand complex HMRC investigations and the Contractual Disclosure Facility process. We can explain what the COP9 letter means, discuss your circumstances confidentially, help you understand your options and guide you through the disclosure process.

Received a COP9 letter from HMRC?

Don’t try to navigate a COP9 investigation on your own.

The decisions you make at the beginning of a Code of Practice 9 investigation can be extremely important. Before submitting an Outline Disclosure or making substantive representations to HMRC, speak to a specialist who understands COP9, CDF and HMRC tax investigations.

We understand that contacting a professional about suspected tax irregularities can feel difficult and daunting. Our role is not to judge you. Our role is to understand your circumstances, explain what is happening and help you deal with HMRC as effectively and appropriately as possible.

If you have received a COP9 letter or Contractual Disclosure Facility offer, contact our COP9 specialists for confidential advice.
The sooner you understand your position, the sooner you can start dealing with the situation with appropriate professional support.