We recently surveyed 605 mid-sized UK businesses on their use of the furlough scheme. We found that 47% of those surveyed made use of the scheme during the last year. Concerningly, almost one in five of these companies have never reviewed their initial claim to check it was correct, according to our research.
According to data from the Office of National Statistics, the total value of claims made by mid-sized businesses, as of 31 October 2020, was over £8 billion.
To police this, the chancellor's autumn Budget announced the creation of the Taxpayer Protection Taskforce. This will give HMRC an additional £100 million in budget and 1,250 employees to tackle fraud in the government support schemes.
With so many furlough scheme claims made in such a short time, mistakes will have been made. Since around 10% of companies have made claims and not gone back to confirm they were made correctly, it's likely many firms will be facing HMRC scrutiny and a potential Code of Practice 9 (COP9) offer.
When HMRC suspects that a firm or individual has knowingly paid less tax or claimed more relief or grants than they ought to have, it will write to them with a COP9 offer. The letter will invite the individual to apply for the Contractual Disclosure Facility (CDF) under COP9.
Once you have received the COP9 letter, you have 60 days to get back to HMRC with one of two possible responses:
If you choose to accept the COP9 offer, you will need to write back to HMRC with full disclosure, outlining what deliberate offences were carried out, how and why they were committed and at least an approximate liability.
Acceptance of the COP9 offer means that you are admitting your guilt and confirming that you knowingly benefitted from a scheme when you weren't entitled to it. You are also offering to resolve the situation so that you do not continue to benefit from the exploitation of the scheme.
HMRC will assess your response and determine whether the disclosure is sufficient to explain the anomalies in their records and whether they want to accept you into CDF, pursue prosecution or abandon the COP9.
If you are accepted into CDF, you will need to attend a COP9 Opening Meeting with HMRC to discuss your disclosure. These meetings will often feel like you're being 'grilled' on the matter and HMRC will question your personal and family background, and the history of your business in their pursuit of fraudulent activity. HMRC also normally use these meetings to reiterate the seriousness of the investigations.
After the meeting, the scope of any additional investigations and a timeframe for a resolution of the matter will be agreed upon. A comprehensive report will be issued, and you will likely need to make a final monetary settlement to HMRC. This will act as a guarantee that you won't face criminal charges.
If you decide to claim your innocence of the fraudulent activity, HMRC will begin an investigation into your tax activity.
HMRC's Fraud Investigation Services (FIS) will dig deep into your tax history and can go back up to 20 years. This all-encompassing investigation can be tense and stressful, even if you are shown to be innocent in the end.
While seeking expert advice is always a good idea when dealing with HMRC, it's especially important to get support when you're dealing with COP9. A mistake here could lead to criminal prosecution or worse, and HMRC publicly 'naming and shaming' you.
Dealing with a COP9 notification is one of the most stressful experiences a business leader can go through in their career. It's vital that you have a confident and knowledgeable advisor on your side.
Sadly, our team often have to take over dealing with COP9 enquiries from other agents. Without the correct experience, dealing with a COP9 can overwhelm anyone.
Our team of tax specialists includes former HMRC inspectors who know the COP9 process, inside and out. Our connections at HMRC allow us to predict what will be asked of you and ensure you prepare your response correctly and quickly.
To learn more about how we can help you with COP9 notifications, visit our HMRC enquiries page.