CoP 8 and 9 Tax Investigations
HMRC’s Code of Practice 8 and 9 (fraud and bespoke avoidance) is operated exclusively by the Fraud Investigation Service (FIS) branch of HMRC.
Dealing with a Fraud Investigation Service CoP 8 or 9 enquiry without specialist support can be risky
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COP 8 and 9 Tax Investigations, what you should know
Code of Practice 8 Enquiries
FIS only takes up cases where the likely “yield” (of tax, interest and penalties) is over £500,000. Many of HMRC’s largest prosecutions commence in FIS and most start out as Code of Practice 8 “tax avoidance” cases; rather than fraud cases. If FIS is involved it means HMRC believes the case is serious, large, and complex – and ultimately will to lead to a substantial payment. Such enquiries can be very damaging; especially as most FIS COP 8 cases involve extensive approaches to 3rd parties (e.g. banks, business suppliers, customers, ex-employees, internet service providers etc).
Offshore issues feature prominently in many COP 8 cases. Many feature complex arrangements: such as the routeing of payments through non-UK companies; often with an overseas dimension. FIS also issue COP 8 in significant cases involving tax residence issues (of companies and individuals) and issues. Most investigations into suspected “tax avoidance” will be into so-called “off-the-shelf”, or “marketed avoidance schemes” which HMRC considers contrived or where they suspect the real arrangements have been deliberately obscured.
Dealing with a Fraud Investigation Service COP 8 enquiry without your own specialist support can be risky (partly due to the risk of Criminal Prosecution or naming and shaming under HMRC’s Publishing Deliberate Defaulters policy); very expensive (as the tax and penalties bill is likely to be far higher than necessary); and very time consuming. Penalties can be up to 100% of the tax lost in non-offshore related cases, and since 1 October 2018 aggressive new penalties apply to offshore issues, of up to 300% of tax underpaid. If you or your client are subject to HMRC enquiry under COP 8 please speak to one of our IDR Consultants at the earliest opportunity.
Code of Practice 9 Enquiries
Code of Practice 9 investigations ( COP 9 ) investigations are the most serious of investigations other than a criminal prosecution and are cases that often have already been considered for prosecution.
COP 9 enquiries are opened by offering of the contractual disclosure facility – CDF.
If you receive such a letter you will be invited to make an outline disclosure of any irregularities within 60 days. You can reject this offer but if you do so, HM Revenue & Customs will undertake their own investigation with a potential view to Criminal Investigation.
If you accept the offer of the CDF, you must seek specialist advice before completing the outline disclosure as the content of the disclosure will determine the conduct of the investigation going forward.
If you make a full disclosure then you will not be prosecuted but if you miss something from the disclosure or only disclose part of the problem, your case will again be considered for prosecution.
As this is such a serious matter, you should seek appropriate specialist advice and our former HMRC officers are best placed to provide the advice and protection required.
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