Have you received a letter from HMRC’s Fraud Investigation Service?

• Non-UK assets and Non-UK sourced income/gains/profits
• Offshore entities and structures
• Central management and control of Companies (to determine if a company is UK tax resident)
• UK and non-UK Trusts/Charities
• Annual Envelope Dwelling Tax
• Capital Gain Tax Returns for UK properties
• UK complex property transactions
• Application of UK anti-avoidance legislation
• High Profile individuals or entertainers/ sporting figures, whose tax affairs are complex or not up to date or have failed to register for tax
• Any bespoke tax planning where large amounts of tax may be at risk

FIS will notify the taxpayer that it has commenced a COP8 investigation and normally explains the reasons for the enquiry, even though it does not need to do so. During a COP8 investigation, FIS may choose to change their approach, where it suspects or finds evidence of fraud or deliberate or dishonesty. In those situations, HMRC may decide to conduct an investigation under Code of Practice 9 (COP9) or a criminal investigation under the Police and Criminal Evidence Act 1984.

COP8 investigations can be very intrusive from both a personal and business perspective, as FIS investigators may as part of their enquiries seek information and documents from the taxpayer, third parties (including financial institutions) and overseas Tax Authorities.

There has been a steady rise in the number of investigations conducted under Code of Practice 8 (COP8).

Only HMRC’s Fraud Investigation Service Unit conduct COP8 investigations, where fraud, deliberate behaviour or dishonest conduct is not suspected, or, where COP9 is not deemed appropriate or involves what HMRC refers to a ‘bespoke tax avoidance’.

A COP8 enquiry can cover a number of years and all types of taxes, regardless of whether or not the time limit to open an enquiry into a return has elapsed. As part of a wider HMRC enquiry, FIS may instead undertake a COP8 enquiry into a specific issue with other non-FIS teams dealing with other issues.

HMRC has limited resources to conduct criminal investigations in every case, where it suspects fraud or deliberate behaviour or dishonest conduct. As an alternative, HMRC may therefore choose to investigate using the procedure known as the Contractual Disclosure Facility (CDF) under Code of Practice 9 (COP9).

The purpose of CDF is to provide an opportunity for the person under investigation to disclose all tax irregularities to HMRC. In doing so, HMRC guarantees not to pursue a criminal investigation for any tax offences that have occurred. However, where a person makes a partial disclosure, or denies any tax irregularities, HMRC retains the right to criminally prosecute for deliberate behaviour, fraud or dishonest conduct.

It is important to understand that HMRC will only undertake COP9 where the amounts of duty it believes to be at stake is significant or the seriousness of the offence is great. It is not a process HMRC embarks on lightly.

Our Tax Investigations and Dispute Resolution Service includes former HMRC FIS investigators with an extensive experience of CDF and COP 9 process in both HMRC and private practice.