Skip to content

COP9 (HMRC Suspicions of Serious Tax Fraud)


Code 9 or "COP9" is an HMRC civil investigation route. 

Broadly, it is a last chance opportunity to regularise the tax position without going down the perilous criminal investigation route. This can be a voluntary decision or HMRC may have already opened an enquiry/tax investigation. 

Timing with candid/pragmatic advice is essential.


HMRC can and do fish...mere "suspicion" opens up information and access powers for HMRC investigators. They will not simply go away with a crafted letter. An evidenced-based approach is required by an experienced professional.

At times HMRC investigators lack technical appreciation of discovery statute. They are experienced and operate at a high level and we have estblished senior contacts.

Pragmatism is an essential ingredient in facilitating safe passage to reach a conclusion.

Essentially, we are advocates, defend clients and advise options together with entering into HMRC's Contractual Disclosure Facility ("CDF"). This is an entirely formal process and not a cost-free environment. It involves an adoption report. We shoulder the burden for the "temporarily adopted" client. 


The COP9 CDF process has stages which involve:

  1. Clearance from HMRC to trigger an HMRC CDF Offer;
  2. Materially complete Outline Disclosure of the tax fraud and other tax irregularities;
  3. HMRC CDF acceptance; 
  4. COP9 Scoping Meeting; and, 
  5. Proportionate, but robust Report.

The negotiated settlement is subject to HMRC scrutiny of the Report with Certification and a negotiated settlement exit. 

Case management of COP9 and HMRC Fraud Investigation Service (incorporating Proceeds of Crime/Criminal Taxes Unit) and dealing with such matters are shark-infested waters and unfamiliar territory for many accountants and other professional firms. 

With complex document-heavy cases involving multi-exit strategies these HMRC matters can quickly become time-consuming and stressful for the client and uninitiated. 

Our experience is technically extensive, but pragmatic in reaching a negotiated conclusion for those who are under HMRC scrutiny. 

We provide support and expertise including an effective strategy, preparing disclosure reports, negotiating exit settlements and penalty mitigation with time to pay. 

For those requiring a preliminary meeting please contact Chris Leslie. 

Chris leslie's background: With a First Class Honours in Computing Systems Analysis and 23 years experience, Chris took up an offer outside HMRC. Tax Networks Ltd was incorporated and for many years Chris has been advising/negotiating on the full spectrum of HMRC tax investigations to defend clients and regularise the position. 


M: 07852700634 


Chris Leslie "as featured in The Barrister Magazine"

As I’m currently representing a couple of barristers in two separate CoP9 tax investigations I thought it was the right time to write an article.

The Barrister Magazine haven’t wasted any time and they have published my piece online. See link:-

I have spoken to the publishers of The Barrister Magazine and they said it was well written, which is why they were happy to put it straight out.

Sounds like The Barrister Magazine would be up for a follow up piece again. They have also tweeted it, and put it on Facebook.

I’m also fairly prolific publisher on Linkedin.

Clearly, my objective is to generate interest in my business and I can also now refer to the article in future approaches “as featured in The Barrister Magazine”, which should give some real kudos in what is a very closed community.



HMRC Raid on Football Clubs – snatch of the day

Image Rights, Salary and Taxes

A footballer’s "image" creates a "value" which the Club pays to endorse and promote a number of specific commercial deals. The value is what the Club expects to generate and pays the player for those rights.

That value is transferred to the player’s personal image rights company and the contract with the Club limits the player’s personal deal options, such as the player cannot endorse another sponsor or seek to share in revenues from other personal deals.

Standard Premier League employment contracts are generally restrictive and it is crucial for the Club to contract separately with the player's image rights company to have control of those rights to endorse particular products and services.

Consequently, a player's engagement terms are likely to be an employment contract with an image rights agreement being separately negotiated.

Clearly, this is a matter which is open to abuse and where the salary is reduced and the image rights inflated, then that becomes a tax issue - a matter HMRC will scrutinise at every turn.


Consequential taxes and benefit to the Club

In terms of taxes, PAYE and Employees NICs are deducted from the payments to the player, but the Employer’s NICs increase the total cost to the Club; however, the image rights payments are charged to corporation tax by the player's image rights company – the Employer’s NICs savings to the Club are considerable.

However, there needs to be commercial justification how that deal had been valued and how the club had exploited those rights as part of its wider commercial strategy. 


HMRC's Capped Deal - the image rights offer

HMRC and Clubs understand that higher profile players are marketable assets off the field and commercial partners are keen to engage with high profile clubs.

If proportionate, there were legitimate ways to structure payments to players for performance and also image rights in return for endorsing particular products and services.

Broadly, I believe HMRC's offer to all Premier League clubs was capped:-

  1. The Stage 1 Cap was that a club can make a maximum total image rights payments to all players image rights companies of 15% of commercial income. For example if the commercial income is £100M, then the maximum payments to image rights companies are £15M.
  2. The Stage 2 was the player cap as 20% of the total salary payments made to a player in the tax year.
  3. Clubs needed to write to HMRC if they wanted to take up the image rights offer.



Many footballers will not be UK domiciled for tax purposes and will hold their image rights through a non-UK company. This may mean that the payments escape UK taxes altogether.

Generally, if an image rights deal with HMRC and payment arrangements were deliberately falsified (or breached) resulting in tax consequences that deal is open to an HMRC tax fraud investigation. Also, any diverted/off-record payments to evade tax will be subject to an HMRC tax fraud investigation, which may result in criminal prosecution.


Chris Leslie, Director for and on behalf of Tax Networks Ltd

(M) 07852 700634 and




Twitter @ChrisALeslie

The PART 7A loan charge – a recent hokey cokey


What is a typical disguised remuneration (“DR”) avoidance scheme?

Using an Employee Benefit Trust as an illustration, consider that the flow of payments from the company to a Trust and onward to family Sub-trusts for funds (described as “loans”) then to be deposited in the participator’s personal bank account is regarded as a disguised remuneration (“DR”) scenario.

The loans are rarely/never repaid and remain outstanding. Sometimes a commercial rate of interest is charged or otherwise the beneficial (“cheap”) loans are treated as a P11D Benefit in Kind and income tax is paid annually.

NB. The above refers to Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

FB 2017 No. 2 and the hokey cokey

The Financial Bill 2017 (No. 2) axed many of the proposed clauses in the Resolution and our friends at the CIOT provided an excellent summary of what was “In” and “Out” (and shake it all about).

Take for example clause 48, broadly Schedule 16 triggers a new tax charge introduced on DR loans that are “written off”. However Schedule 17 intended to trigger a new tax charge on DR loans outstanding on 5 April 2019 (‘the loan charge’). On 25th April 2017 the Schedule 17 resolution for Finance Bill 2017 was chopped. Before celebratory champagne corks are popped while dancing the hokey cokey, I would suggest that the (“DR loans outstanding”) matter will/must be revisited later when the new Parliament sits following the 8th June 2017 General Election.  

Employer PAYE & NICs

The tax charge includes not only PAYE employment income taxes, but Schedule 16 of Finance Bill 2017 (No. 2) regarding the Part 7A charge will also include Class 1 NICs in the appropriate circumstances. Where these changes result in a charge under section 554Z2 ITEPA 2003, as amended, a NICs charge will arise due to Regulation 22B of the Social Security (Contributions) Regulations 2001 (‘Regulation 22B’). This regulation treats the amount of the PAYE employment income under section 554Z2 as earnings for, both primary and secondary, Class 1 NICs purposes.

The reasonably informed reader will realise that the tax charge operated under the PAYE and NICs regulations are operated by the Employer Entity.

Financial distress

The UK is in financial distress and therefore HMRC is the enforcement authority tasked to recover taxes. This is easier said than done when considering the litigation of tax avoidance schemes is both costly and time consuming. Enter a new tax charge – Accelerated Payment Notices (“APNs”).

Broadly, DOTAS notifiable tax avoidance schemes attracted APNs and in the illustration above the Employer Entity has been ruthlessly pursued by HMRC. In some cases this has resulted in insolvency proceedings.

But hang on, where can the Insolvency Practitioner go to where there are no funds left in the company to pay the creditors, including HMRC which since September 2003 has been a non-preferential creditor but armed with a raft of recovery powers? After all, Schedule 17 was axed (but even if it had not, the PART 7A charge was to be attracted at 5th April 2019 anyway) and despite both the 2015 and 2016 Budget promises there is still no statutory instrument to transfer PART 7A PAYE/NICs to the director.  

In summary

The informed reader will realise that DR is pointed at PAYE/NICs and logically dismisses the loans theory and therefore no indebtedness attributed to a director loan account ("DLA"). Using this "logic", it follows that unless the directors were wilful, the existing insolvency powers and HMRC Regulatory 72/81 and NICs equivalents may be ineffective and no claw-back from the director.

I suspect that Parliament has a mountain of tax legislation to consider, but meanwhile the liquidators and directors appear to be in a limbo situation with HMRC pressing hard to recover taxes from a nonsensical situation as sticky as sticky the stick insect got stuck to a sticky bun.

Please contact me if you need assistance in unravelling complex tax-technical matters or an HMRC tax investigation that has gone wrong.  

The IR35 Virus

For PSCs providing services to the public sector and claiming to be outside IR35 a comprehensive IR35 contract review is vital and it should be undertaken.

HMRC GUIDANCE: "Off-payroll working in the public sector: reform of intermediaries legislation" was published on 3 February 2017 and updated 1 March 2017, this covers the changes to the way intermediaries legislation (IR35) is applied to off-payroll working in the public sector from 6 April 2017.

The Spring Budget 2017 supporting the IR35 reform policy is found here.

HMRC stated that public authorities, agencies and third parties supplying contractors should consider existing contracts and prepare for the change. HMRC advised that an Employment Status Service would be provided in the shape of a web-based tool that was eventually provided on 2nd March 2017, just days before the reforms were to be implemented!


Legitimate Expectation: HMRC and the Employment Status Service ("ESS") Tool

HMRC says:-

  • "Interested parties can use the Employment Status Service tool to obtain the HMRC view of whether any current and prospective workers would fall within the off-payroll rules from 6 April 2017.
  • This new digital service provides the HMRC view of the employment status of a worker. The user answers a number of questions around the relationship between the worker and the public sector client they are contracted with. It is for the public authority to decide whether off-payroll working rules should apply.
  • Use of the service is optional."

This is a mighty fine statement of intent and provides a legitimate expectation.

Using the tool and its rule based questions start with substitution (which I believe is neutral unless it genuinely exists in the working arrangements although a right of substitution and the worker actually engaging and paying the substitution is an important point). A killer Punch.


Employment Status, IR35 and (Fettered?) Substitution

Some notable principles regarding fact-finding and the substitution test, whether fettered, is found in cases such as F. S. Consulting Limited v. Patrick McCaul (HM Inspector of Taxes) [2001]. A sample of other cases are: Synaptek Ltd v Young; Usetech Ltd v Young; Dragonfly Consultancy v HMRC Commissioners; Autoclenz Ltd and Belcher & Ors, and so forth. HMRC’s interpretations and summaries can be found here.

The ESS tool can be used to conduct input/output tests so long as the facts of, say, the above cases are accurately inputted. Others have commented, that HMRC's ESS tool determines that the contractor was outside IR35, which is diagonally opposed to the human judgements and decisions released by judges.

Take for instance the key factors which summarise the Pimlico Plumbers Ltd v G Smith decision below:

  • The UK Court of Appeal commented regarding the ability of appointing a substitute to undertake the work. It was noted that an unfettered right to appoint a substitute is inconsistent with an undertaking to do work personally, outside employment. But also, whether a conditional right to substitute another person is inconsistent with personal performance and this was dependant on the nature and degree of any limit on that right of substitution. There were however restrictions on Mr Smith as he was required to obtain Pimlico's consent if he wished to engage a substitute to carry out the services. This case indicates how the employment appeal tribunal approached the substitution test.
  • The Court was influenced by the overall level of control exerted by Pimlico over Mr Smith, despite some contractual terms which suggested he had a degree of independence and he could provide his own equipment to carry out the work.
  • Whilst Mr Smith had discretion over certain elements of how he performed the work, the UK Court of Appeal upheld that the decision of the UK Employment Tribunal that he was engaged to personally provide the services to Pimlico.



Employment lawyers - I think, but do not necessarily in every case - tend to emphasise the Autoclenz case, which indicated that the actual working practices take precedence over the contract terms when assessing employment status. This is very much in line with the IR35 approach to take. However, my experience is that a PSC contractor will face a hurdle in persuading HMRC that the end-client has no right of control over how the work is done if the contract terms are contradictory. This is just one area where hypnosis starts during HMRC's reviews that are operated without formal enquiry statue and no apparent code of practice in a self-policing fashion.

The main problem is that standard terms do not exclude any right of control by the end-client over the PSC. Indeed, some provisions can give the impression that the written form creates a strong right of control and it is undeniable that a contractor wishing to operate outside of the IR35 legislation cannot be subject to (or to the right of) supervision, direction or control by any person. SDC might be considered as HMRC’s main trump card but as opposed to the ESI, the leading questions for the ESS start with the substitution test.

Whilst the ESS had to start somewhere, it is presumably revealing that HMRC started with substitution and hence the Killer Punch if genuinely part of the arrangements - the subset of personal service.

We shouldn't forget tests such as Mutually of Obligations et al, and cross-overs.


Conclusion about HMRC ESS

There are many critical responses, some technical and founded and then some curious comments by people who promoted the ridiculous notion surrounding “BETs” (subsequently dishonoured and removed).

If only Carlsberg did the ESS tool it might have had a decent decision logic, but instead I believe the tool is flawed. One main reason is rubbish in and rubbish out, passing the outside IR35 test. Try it, using it and applying even HMRC’s own case law summaries - input them into the ESS tool. The Italian Job..."your only intended to blow the bloody door off" (Michael Caine) comes to mind and the explosive effect using the ESS tool - IR35 smashed to smithereens.

HMRC’s yes/no ESS development surely continues, but rubbish in/out danger exists, which means HMRC will probably not give a jot to its own ESS tool pass result. The risk factor is high and confidence must be low in such a tool.


IR35 Assurance Reviews: Onus on the Public Sector Contractor (“PSC” – not to be confused with a PSC?!)

Such reviews whether just in time with the ESS tool roll out or previously (remember "Use of the service is optional") mean that the PSC contractor had/has every reason to believe that his IR35 Assurance Review by a competent tax adviser was met and I cannot think of any reasonable measures that could have been taken beyond what the PSC contractor relied upon. This approach means that the PSC director would have had reason to think he had undertaken reasonable care as the PSC’s contractual arrangements maybe (more or less) very similar for each contractual engagement. Evidence of what is surely regarded as a reasonably diligent businessman who had understood and operated his Director's fiduciary duty.

However, HMRC reform (statutory new rules) places onus on the public sector fee-payer. In reality these last minute new rules have been rushed and sloppy resulting in the Public Sector default position of every PSC being inside IR35 or having to go through an umbrella/agency neatly sidestepping the issue but apparently being outside of what was intended to be a critical IR35 evaluation.

The legitimate expectation laid down by HMRC guidelines, ESS and what was presumably intended, has resulted in many PSC bodies not even considering IR35 as it’s too risky, judgemental and practically impossible to look at each case in such a short space of time.

IR35 over the years has been responsible for wasted costs, confusion, and its metamorphosis has displayed something akin to the law of unintended consequences.


Unintended Consequences of Tax Regulation and the Killer IR35 Virus

In the best-case scenario, I believe an action produces both the desired results and unplanned benefits; in the worst-case scenario, however, the desired results fail to materialise and there are negative consequences that make the original problem worse. It is not enough for Parliament to endorse legislation that promises to do something good. HMRC need to think through the full consequences of a policy, because often it will lead to a cure worse than the disease. This is magnificently illustrated by this “IR35” 17-year-old and the sticking plasters applied by HMRC in attempts to reform the intermediaries legislation.

Of course "deeming" PAYE is subject to conditions and specified rules. Take for instance agency regulations that were circumnavigated by the creation of PSCs which resulted in the birth of IR35 and then Management Service Company (MSC) legislation - the "Chapters" of wasted costs.

Equally, genuine personal small companies have operated before these elephant in the room tests and true businesses have been attacked, probably because of others operating in contrived schemes.

Whilst the attack on self-employed/small personal service businesses continues, these risk-taking enterprises prevail despite increases in NICs and cuts in dividend tax reliefs.


Enforcement of IR35 "Fuzzy" Logic

When perfectly enforced(?), IR35 tax legislation obligates the Personal Service Company ("PSC") to consider whether a hypothetical employment exists between the worker/director and the end client/employer exists. This is broadly subject to employment status principles - or status tests, some of which are mentioned above and displayed in the ESS tool - established in case law. A highly subjective interpretation and application that has confounded mostly everything and everyone including HMRC since IR35 was introduced in 2000 (and employment status generally for many years beforehand). IR35 was always going to be a road crash.

If IR35 applies then (broadly) PAYE/NICs are operated on the net profit perhaps analogous to say a dividend.


Illustration of Some IR35 Substantive Issues

However, there are substantive issues due to HMRC resources and technical capacity to police legislation that applies to the many PSCs in the supply chain. Same applies to the PSCs and tax advisers.

This has been a massive logistical problem for HMRC resources. I believe that this is why the new "rules" (Off-payroll working in the public sector: reforming the intermediaries legislation) effective from 06/04/2017 were introduced compelling the public sector end client/agency/paymaster to operate IR35. However, this apparently prejudices the PSC operating in the public sector and it appears that some unintended consequences will result in IR35 being applied by default, or massive emphasis being placed on an HMRC web-based decision tool (the "ESS") that is an ineffective public relations exercise (similar to the woeful Employment Status Indicator).

PSC migration to private sector will mean that the public sector has an increased cost to directly employ skilled operators. Another unintended consequence.

The other apparent issue I mentioned above is the competence and application of relevant status tests - relevance to establishing hypothetical and sometimes undefined working practice arraignments. Impossible to perfectly police in the many to many world of arrangements.

That also leaves the issue I have mentioned above about HMRC development of the ESS web-based tool and the myriad of consequential technical matters, but also just out of time publication late on 2nd March 2017 as stated above.

It is clear that IR35 tax yield is negated by the overall cost in complying with judgemental legislation incapable of being policed by HMRC.

In reality, there are genuine risk-taking PSCs which are prevalent in the supply chain, but HMRC does not have the resources or capacity to perfectly enforce IR35 regulations - nor can it simply reform the delinquency of bad legislation.

I believe the Chancellor's Spring 2017 Budget had to go along with the IR35 reform but at what cost to the Public Purse and people who provide personal consultancy services?

Please feel free to call or e-mail me for advice in relation to IR35 resolution, employment status or the agency regulations.


Tax Scheme Fever and HMRC Accelerated Payment Notices


HMRC must have a substantial task with the sheer volume of ubiquitous tax avoidance schemes out there, because I believe the Accelerated Payment Notices (“APNs”) work is being centralised by the new Counter Avoidance Directorate.

Relevant schemes have already been selected by HMRC and the preliminary list of schemes being targetted is located here!

When this controversial proposal takes effect after Royal Assent in July 2014 HMRC will need to prioritise and serve APNs according to certain criteria.

What is the Criteria?

1. HMRC is enquiring into the taxpayer’s return or claim, or the taxpayer has made an appeal against a closure notice or discovery assessment that has not been determined;

2. The taxpayer made the return, claim or appeal on the basis that a particular tax advantage arises from the tax arrangements implemented; and

3. One of the following requirements is met:

(i) HMRC has given the taxpayer a "follower notice" in relation to the same return, claim or, as the case may be, appeal by reason of the same tax advantage arising from the same tax arrangements;

(ii) HMRC has allocated a DOTAS reference number for the tax arrangements, which is required to be notified; or

(iii) HMRC has counterpointed against the GAAR Advisory Panel have suggested that entering into the tax arrangements was not a reasonable course of action.

APNs Priority List?

I am suggesting that those who already have conceded to participating in ineffective tax avoidance schemes may be lower down HMRC’s priority list of APNs, because there is no dispute about eventual tax settlement. In terms of settlement offers, in the case of Litman & Newall v HMRC TC03229, the taxpayers' appeal was dismissed but the judge did decrease the penalties from 40% to 10%, so HMRC's general threats of 50% penalties should be rebutted.

However, back to APNs, those DOTAS registered schemes and/or taxpayers under enquiry will probably be early on HMRC’s APNs list. I believe that is why APNs have been introduced to stop deferral of tax, even though interest accrues – it is apparently a Treasury cash flow thing.

What about late payment after the APN is served?

Even if I am wrong and Just after July 2014 HMRC does issue an APN in an ongoing enquiry case and the taxpayer fails to make the payment of the accelerated amount by the penalty date (the day following the payment date) the taxpayer will be liable to a penalty of 5% of the APN amount. A further 5% penalty applies if any amount of the APN remains unpaid five and 11 months after the penalty date - to me, it resembles a late payment surcharge rather than a behavioural penalty.

Time To Pay Arrangements

I understand the normal TTP arrangements will be available and a statement of assets and liabilities may ultimately be required by HMRC. Importantly, HMRC should be reminded that it is highly debateable if a bank will loan money on a fixed asset if when answering the question - "what is the loan for"!

But let us consider that there are no assets liquid or otherwise and the taxpayer is made bankrupt by HMRC APNs before a Tribunal case is heard. Now that is simply not British HMRC, is it? That is why proper advice is needed.

Objecting to an APN

There are 90 days from the date of the APN to send HMRC representations giving reason for object