COP9 vs HMRC Criminal Investigation: Why the Choice Matters

When HMRC suspects serious tax fraud, it faces a fundamental strategic choice: Code of Practice 9 and the Contractual Disclosure Facility (the civil route) or criminal investigation by its Fraud Investigation Service (the criminal route). For the taxpayer, these two routes lead to entirely different destinations. COP9 leads to a private financial settlement with no criminal record. The criminal route leads to the possibility of arrest, prosecution, imprisonment and POCA confiscation. Understanding how HMRC makes this decision and what you can do about it, is perhaps the single most important piece of knowledge in serious tax fraud defence.

The fundamental fork in HMRC’s approach

HMRC’s Criminal Investigation Policy explicitly states that where deliberate non-compliance is suspected, HMRC must determine whether civil investigation (COP9) or criminal investigation better serves the public interest. This is an active decision, made by senior officers in the Fraud Investigation Service, not a default outcome. The choice is HMRC’s to make, the taxpayer cannot demand one route over the other. But the taxpayer’s behaviour and specialist representation, can influence which way HMRC decides to go.

The consequences of the two routes are not merely different in degree; they are different in kind:

• COP9 (civil): private proceedings; financial settlement comprising tax, interest and penalty; no criminal record; no public disclosure; immunity from prosecution for disclosed conduct; conducted under civil investigation powers
• Criminal investigation: conducted under PACE 1984; arrest, interview, search of premises; referral to Crown Prosecution Service; charge; trial; conviction; imprisonment; public criminal record; POCA 2002 confiscation proceedings

Both routes ultimately recover the tax. Only one of them ends with the taxpayer potentially in prison.

What COP9 is and what it offers

Code of Practice 9 is HMRC’s civil investigation of fraud procedure, issued by the Fraud Investigation Service when it has reason to believe that a loss of tax has been brought about by deliberate conduct. For a full explanation, see our complete COP9 guide.

The core mechanism is the Contractual Disclosure Facility (CDF). The CDF is an offer of immunity from prosecution in exchange for a full, complete and accurate disclosure of all deliberate non-compliance. The taxpayer who accepts the CDF, makes a genuine disclosure and cooperates throughout will not face criminal prosecution for the conduct disclosed. The settlement is civil: tax, interest and a negotiated penalty.

COP9 is conducted under civil investigation powers, specifically Schedule 36 Finance Act 2008, which gives HMRC the power to require the production of documents and to conduct compelled interviews. Unlike a criminal investigation, where the taxpayer has a full right of silence, civil investigation powers can require cooperation. However, the CDF provides a specific protection: material produced in response to Schedule 36 powers during a genuine COP9 disclosure will not be used as criminal evidence for the disclosed conduct.

The COP9 offer letter and the 60-day window

When HMRC chooses the civil route, it issues a COP9 letter. This letter:

• Notifies the taxpayer that HMRC believes a loss of tax has arisen from deliberate conduct
• Invites acceptance of the CDF within 60 days
• Requires an Outline Disclosure to accompany the acceptance, a short document summarising the nature and extent of the deliberate behaviour
• Makes clear that refusal or failure to respond will result in a civil investigation without the benefit of the CDF and carries a significantly higher risk of criminal referral

The 60-day deadline is absolute. There is no extension. If the deadline is missed, the CDF offer lapses. HMRC will proceed on its own terms and the case becomes significantly more dangerous.

Receiving a COP9 letter does not mean HMRC has chosen the civil route irrevocably. It means HMRC has offered the civil route. The taxpayer must accept it by making a genuine and complete disclosure. A dishonest or incomplete acceptance is treated as worse than a denial.

What moves HMRC to the criminal track instead

Understanding what tips HMRC from the civil COP9 route to the criminal investigation route is essential. The key factors are:

Amount of tax involved

Higher amounts of evaded tax make the criminal route more attractive to HMRC. There is no absolute financial threshold, but cases where the tax loss is in the hundreds of thousands or millions are significantly more likely to be referred to criminal investigation than smaller cases.

Sophisticated concealment

Evidence of elaborate concealment, offshore corporate structures, nominee shareholders, false invoices, phantom employees, falsified accounts, indicates deliberate planning and is a strong indicator for criminal referral. The sophistication of the fraud demonstrates that it was not a mistake or misunderstanding, reducing the justification for the civil route.

Third-party involvement or organised criminal activity

Where the investigation reveals that the taxpayer has involved others in the fraud or is part of a broader criminal network, such as an MTIC VAT fraud chain, the criminal route is strongly favoured. Organised fraud has a greater deterrence rationale for prosecution.

Previous civil settlements not honoured

A taxpayer who has previously been through COP9 or another civil settlement process and then re-offended is a priority criminal prosecution target. HMRC regards re-offending after a civil settlement as a particularly serious aggravating factor that removes the justification for a further civil resolution.

Intelligence suggesting criminal activity beyond the tax

If HMRC’s intelligence suggests the taxpayer is involved in other criminal activity, money laundering, drug trafficking, people trafficking, the case is likely to be referred to or conducted jointly with the National Crime Agency, and the criminal track is all but certain.

Public deterrence value

HMRC uses press releases about successful prosecutions as a deterrence tool. Cases involving tax professionals, accountants or insolvency practitioners or high-profile individuals, carry particular deterrence value and are more likely to be pursued criminally even where the financial amount might otherwise favour the civil route.

The privilege against self-incrimination: civil vs criminal

The right against self-incrimination operates very differently in the two routes and understanding this distinction is critical for specialist advisers.

In a criminal investigation, the taxpayer has a full privilege against self-incrimination. They cannot be required to answer questions, produce documents or cooperate in a way that would incriminate them. HMRC’s Schedule 36 information powers are disapplied in a criminal investigation. The right of silence applies throughout, including in voluntary interviews under caution.

In a COP9 civil investigation, Schedule 36 Finance Act 2008 can compel the production of documents and the attendance at interviews. The taxpayer cannot simply decline. However, the CDF provides an important protection: material produced under compulsion during a genuine COP9 disclosure process will not be used as evidence in criminal proceedings for the matters disclosed. This “use immunity” is the mechanism by which HMRC can require cooperation in the civil process while maintaining that it will not use that cooperation to prosecute.

The use immunity does not protect against prosecution for undisclosed matters. It does not protect an advisor who assists in a fraudulent disclosure. It is conditional on the disclosure being genuine and complete. This is why the scope of the disclosure is the pivotal decision in every COP9 case.

Once criminal investigation starts: there is no civil off-ramp

Once HMRC’s FIS formally opens a criminal file, the civil route is closed. There is no mechanism by which a taxpayer facing criminal investigation can unilaterally invoke COP9 and switch to the civil track. The decision is HMRC’s and, once made, it is not reversible by the taxpayer.

This is the most important practical point in this entire area. The window to influence HMRC’s choice is before the criminal file opens. Once it is open:

• No COP9 letter will be issued
• No CDF will be offered
• No immunity from prosecution is available
• The only available strategy is criminal defence

Criminal defence in a serious tax fraud case is expensive, time-consuming and carries life-altering risk. The financial cost of a contested Crown Court trial is typically far greater than the cost of a civil COP9 settlement. And where prosecution succeeds, POCA confiscation proceedings can impose financial consequences that dwarf the underlying tax liability. For the full picture, see our guide to the HMRC prosecution process.

The window to act and why it closes fast

If you know or suspect that HMRC is investigating your affairs, through any source, but have not yet received either a COP9 letter or any criminal notification, you are in the most valuable position you will ever be in this process. Both routes are potentially still open.

The window in which specialist intervention can influence HMRC’s civil/criminal decision is typically the period between HMRC receiving intelligence and HMRC formally committing to a route. This period varies, it may be months or it may be very short, but it is finite and it will close without warning.

Proactive engagement by specialist advisers during this window can:

• Demonstrate to HMRC that a genuine and full civil disclosure is available, removing the need for the criminal route
• Present the taxpayer’s conduct in the most favourable light before HMRC has formed its view
• Identify and address the factors that HMRC most commonly uses to justify criminal investigation
• Initiate a COP9 approach before HMRC sends its own COP9 letter, a proactive COP9 approach (rather than a reactive one) typically produces better outcomes in terms of penalty reduction and relationship with HMRC

Tax Dispute Consultants has handled this window for many clients over many years. We know how HMRC makes the civil/criminal decision, we have made it ourselves. If you believe you may be under investigation, the call you should make is to us, before anyone else and before you make any contact with HMRC.

Related: HMRC criminal investigation overview , COP9 explained , dawn raids , voluntary interview under caution , the prosecution process , POCA and tax investigations , our Fraud Investigation Service.

Frequently asked questions