By Siobhain Egan – Director (Non-Executive)
If you’ve been contacted by HMRC about a potential tax fraud investigation, you may be feeling anxious about what comes next, especially if your case warrants criminal prosecution. But in some cases, HMRC offers a different route: a chance to resolve the matter through its Code of Practice 9 (COP9) process. Known as “civil diversion”, this can be quicker and more cost-effective for all concerned.
What is civil diversion?
Civil diversion allows HMRC to deal with serious tax fraud through civil procedures, usually via the Contractual Disclosure Facility (CDF), which is governed by Code of Practice 9 (COP9). Individuals or businesses suspected of deliberate wrongdoing are offered the opportunity to admit the fraud and make a full disclosure, as well as paying back the tax they owe along with any interest and penalties.
In exchange, HMRC agrees not to pursue a criminal investigation, provided the disclosure is complete and truthful. COP9 cases are not publicised, meaning that businesses and individuals can avoid the negative publicity and reputational damage that may arise from a court case.
Why does HMRC offer civil diversion?
From HMRC’s perspective, civil diversion is a pragmatic choice as it avoids the expense incurred by lengthy legal proceedings, which it may not even win. The process also encourages voluntary disclosure; a suspect facing the possibility of prison may be more inclined to come clean – and pay up – if they know criminal charges are off the table.
Who is eligible for COP9 and civil settlement?
COP9 is only available in specific circumstances, and HMRC is under no obligation to offer it. For example, if you are suspected of criminal activity beyond tax matters, or if there is a strong public interest in prosecution (such as a deterrent effect), COP9 will not be an option.
What happens if you break the terms of COP9?
If you go forward with COP9 but are later found to have lied or omitted information, HMRC can revert to criminal prosecution and the case may be publicised – as Bernie Ecclestone was to discover. The former Formula One chief was initially offered COP9, but this was abandoned when it came to light that he had failed to disclose more than £400 million in overseas assets. Ecclestone received a 17-month suspended sentence in 2023, as well as agreeing to a £652 million settlement covering 18 years of unpaid tax, interest and fines.
How common is civil diversion?
COP9 is used sparingly; in the 2023–24 tax year, HMRC launched only 268 COP9 investigations, compared with over 10,200 total civil tax-evasion investigations, meaning fewer than 3 per cent of civil investigations were COP9 cases. However, it remains highly effective: only 18 cases were escalated to criminal prosecution, suggesting that the vast majority of COP9 disclosures are successfully resolved.
What are the disadvantages to civil diversion?
While Code of Practice 9 (COP9) offers an attractive way to avoid criminal prosecution, it’s far from a soft option. It’s worth bearing the following in mind before you commit to the process.
- You must admit to deliberate tax fraud – this isn’t suitable for honest mistakes or carelessness.
- There’s no scope to challenge the figures – which can lock you into a higher liability if HMRC’s figures are more than what you believe you owe.
- Financial penalty uplift – HMRC will usually apply a significant penalty on top of the tax owed, especially for deliberate or concealed conduct. This is typically between 35 and 100 per cent of the tax lost.
- Reputation and professional risk – admitting fraud, even privately, may have consequences for regulated professionals or business owners.
Despite these considerations, the advantages of civil diversion usually outweigh the risks as COP9 offers a chance to avoid the reputational, financial and personal fallout of a criminal prosecution. While the process demands honesty, full cooperation and often a significant financial outlay, it can ultimately provide a controlled and discreet resolution. With the right legal advice, it may be the most strategic choice.
About Siobhain Egan
Siobhain is a leading specialist in HMRC-related investigations and proceedings.
She defends clients facing both civil and criminal investigations by HMRC, including criminal prosecutions, account freezing orders, and proceedings under the Proceeds of Crime Act (POCA). Siobhain has been consistently ranked by The Legal 500 since 2002 and is widely recognised for her high success rate. She is regarded as one of the leading lawyers in this complex and highly specialised field.
How Lewis Nedas can help
If you’ve received a COP9 letter or suspect you may be under investigation by HMRC, it’s vital to act quickly and strategically. Our experienced team of tax and criminal defence lawyers can guide you through every stage of the process — from initial disclosure to negotiating a fair settlement.
We understand the fine balance between protecting your rights and cooperating with HMRC. Whether you’re an individual, business owner or advisor acting on a client’s behalf, we’ll help you make the right decisions from day one.
Lewis Nedas has been a top tier firm in the Legal 500 rankings for the past 14 years and has also featured consistently in The Times Best Law Firms list since its launch in 2019.
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