COP9: an underused tool for tackling the tax gap?

A recently published House of Commons Public Accounts Committee report stated that the cost of tax evasion for the 2022-23 tax year is likely to be much higher than HMRC’s estimated £5.5bn. As a result, the report recommended that HMRC establish a clear strategy for tackling it.

One way HMRC can tackle tax evasion is through its Code of Practice 9 (COP9) fraud investigation process, which offers immunity from criminal prosecution in exchange for full disclosure of all tax irregularities. But despite its benefits to HMRC, it remains an underutilised tool for tackling tax evasion. Let’s take a closer look at how it works.

What is the difference between a criminal investigation and a civil investigation?

Although tax evasion is a criminal offence, HMRC can choose to investigate suspected tax evasion on a civil basis as an efficient way to resolve the matter.

In civil investigations, proof is based on a balance of probabilities, meaning it is more likely than not. A criminal prosecution, on the other hand, requires evidence of guilt beyond a reasonable doubt. As a result, criminal investigations take much longer and need significant HMRC resource to secure Crown Prosecution Service support and a successful prosecution.

In 2023/24, HMRC opened 430 new criminal investigations into suspected tax fraud, whereas civil investigations totalled more than 10,200. In total, less than 5% of investigations took place using criminal powers, demonstrating HMRC’s strong preference for using its civil powers of investigation.

Why should HMRC use COP9?

COP9 is a cost-efficient tool which places the onus on the taxpayer and their adviser to undertake a thorough investigation, before presenting a full disclosure of offences and associated tax liabilities to HMRC.

In exchange for co-operation throughout the COP9 process, and on the condition that a full disclosure is made, the taxpayer is offered immunity from criminal prosecution in regularising their tax affairs. It also means HMRC can conclude investigations into tax evasion quickly and efficiently.

COP9 forms a contract between a taxpayer and HMRC. If the taxpayer breaches their contractual obligation of co-operation and full disclosure, HMRC reserves the right to start a criminal investigation.

However, data obtained by RSM following a freedom of information (FOI) request in March 2025 confirmed that there were only 18 active criminal investigations at that time that had commenced as a result of COP9 investigations, representing only 4.2% of the criminal cases opened by HMRC in 2023/24. This suggests that COP9 tends to achieve its aim of addressing tax evasion on a civil basis.

What are the benefits to taxpayers of COP9?

Impact on penalties

If the taxpayer co-operates fully with HMRC during a COP9 investigation, they will:

• Receive immunity from criminal prosecution when bringing their tax compliance up to date.
• Mitigate the financial penalty imposed.
• Protect themselves from being ‘named and shamed’ by HMRC.

When there is an inaccuracy in a taxpayer’s affairs, HMRC will need to consider whether a penalty is due. This is determined by reference to the taxpayer’s behaviour at the time the offence was committed.

If HMRC decides a penalty is due, it will consider the financial basis for the penalty by reference to the potential lost revenue (PLR), which is typically the tax underpaid as a result of the inaccuracy. It will also assess the scale of that penalty, which is calculated as a percentage of the PLR by reference to a range linked to the behaviour demonstrated by the taxpayer.

If HMRC decides an inaccuracy is due to a taxpayer acting deliberately, it can impose a penalty between 35% and 100% (or 200% if the tax relates to overseas assets) of the PLR.

Non-compliant taxpayers can ensure that they are at the lower end of the penalty range by providing HMRC with a suitably high quality of disclosure. This means informing HMRC of any inaccuracies, helping HMRC to understand the basis of those inaccuracies and providing relevant records to evidence the correct position. Taxpayers who co-operate fully with HMRC through the COP9 process can generally be assured that penalties will be mitigated to the fullest extent possible by reference to the behaviour in point.

‘Naming and shaming’

HMRC can publish a taxpayer’s details if they incur a civil penalty for tax evasion. Typically, if the PLR is over £25,000 and the taxpayer hasn’t received full penalty mitigation for the quality of their disclosure, the caseworker will refer the case to HMRC’s Publishing Deliberate Defaulters Specialist Team for consideration.

Information provided by HMRC in response to RSM’s March 2025 FOI request shows between November 2021 and November 2024, only 31 taxpayers within a COP9 investigation had their details published, suggesting the taxpayers who entered the COP9 process typically avoided being ‘named and shamed’ and obtained full mitigation of the penalties imposed on them.

This is in stark contrast to HMRC’s most recent deliberate defaulters list which shows that many taxpayers were charged significant financial penalties, including some instances of no penalty mitigation being applied.

The average penalty percentages applied to taxpayers on the last five lists, published quarterly between March 2024 and March 2025, varied between 65% and 76%. Taxpayers on the last five published lists had average tax and penalty liabilities of over £290,000 and £195,000 respectively, showing that even where a criminal prosecution has been avoided, those on the deliberate defaulters list still incur significant financial impact.

Civil investigations outside COP9

In 2023/24, only 268 of the 10,200 civil investigations into suspected tax evasion HMRC opened were conducted through COP9. This means that over 97% of cases are being dealt with outside of the COP9 contractual framework, without being escalated to criminal investigations.

In the deliberate defaulters list published in March 2025, one corporate taxpayer had a tax liability of over £35m and a penalty of nearly £25m without its directors facing criminal prosecution. Despite the scale of the evasion, HMRC still chose not to escalate the matter to a criminal prosecution.

Analysis of the deliberate defaulters data for the last 12 months suggests that of 10,200 HMRC civil investigations into suspected tax fraud in a year, fewer than 600 taxpayers have had their details published, despite HMRC’s investigation concluding that they have evaded tax. This suggests that many of HMRC’s civil investigations concluded that:

• The taxpayer did not commit tax evasion.
• The PLR was less than £25,000.
• The taxpayer achieved full mitigation of the penalties for the quality of their disclosure.

Is COP9 underutilised?

It is widely considered that the primary benefits of COP9 is the immunity offered from criminal prosecution. But with only 302 criminal convictions for tax evasion in 2023/24, and considering the preference for civil investigations of tax fraud beyond COP9, perhaps too much onus is being put on this benefit.

Taxpayers who take advantage of the COP9 process tend to achieve full mitigation of penalties and avoid being ‘named and shamed’. However, it also appears that the majority of taxpayers who are investigated for suspected tax evasion achieve the same or similar results.

To obtain the full cost and resource efficiencies of COP9, HMRC should make more robust use of its deterrent powers, such as criminal prosecutions, ‘naming and shaming’ and higher financial penalties.

Advisers helping a taxpayer who has committed tax evasion and who is regularising their affairs should always consider if COP9 is the most appropriate way to disclose their position to HMRC.

For more information, please get in touch with Olivia Wiggett, Paul Marcroft or your usual RSM contact.