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HMRC’s Fraud Investigation Service undertakes the most serious tax investigations. Its investigations fall under COP9 or COP 8.
HMRC undertakes investigations under COP9 where they suspect fraud.
It is a highly prescribed code of conduct setting out how HMRC will proceed with their investigation and the taxpayer’s rights.
Having established that they have a suspicion of fraud, HMRC will contact a taxpayer to offer the contractual disclosure facility, agreeing that if the taxpayer makes an outline disclosure of the fraud within 60 days, he or she will be given immunity from prosecution.
Should the taxpayer refuse the offer, HMRC reserves the right to commence its own investigation which may be a criminal investigation. Frustratingly for the taxpayer, HMRC will give no indication in its initial correspondence as to the nature of their suspicions.
The COP9 process can be very intrusive and long-running. Whether the taxpayer agrees to cooperate or not, HMRC will generally seek to meet with them their agent and will question them intensively about their personal and business interests.
If the taxpayer cooperates, HMRC will ask them to commission a report from their agent setting out the irregularities, both deliberate and otherwise, that have resulted in a loss of tax.
That report is a serious undertaking and it will be thoroughly tested by HMRC to ensure that they are satisfied that all areas of concern have been adequately addressed before they enter into a settlement agreement and conclude their investigation.
The taxpayer will also be asked to sign certificates detailing their bank accounts and credit cards and a certificate of full disclosure. The signing of these documents is a serious matter since if they have material errors or omissions HMRC may seek criminal prosecution.
If during the process the taxpayer makes materially false statements, they may nevertheless still be subject to criminal prosecution.
The offer of the contractual disclosure facility only covers those frauds that are admitted on the outline disclosure and therefore if there are further deliberate omissions that come to light, HMRC will again reserve the right to criminally investigate.
For more detailed information on COP9 please see our COP9 – Signpost for links to all our articles on the subject.
The Fraud Investigation Service works under COP 8 where they believe large amounts of tax have been underpaid because of complex tax arrangements or tax avoidance schemes that have been implemented by a large number of taxpayers.
These investigations do not involve the allegation of fraud at the outset; however, investigations under COP8 can be converted to COP9 investigations or even criminal investigations where evidence of fraud is uncovered during the investigation.
Unlike COP9, there is no standard format to a COP8 investigation. However, typical areas of focus for the Fraud Investigation Service undertaking investigations under COP8 include residence and domicile, remittances by non-UK domiciled taxpayers, issues of central management and control of overseas companies the UK tax implications of trusts, foundations and other offshore structures.
Both COP8 and COP9 cases may involve extensive approaches to third parties including banks, suppliers, customers, and so on to obtain information, and can therefore be extremely damaging.
If you, or your clients, have received investigations under COP 8 or COP 9 then you should get in touch as soon as possible.