COP9 and COP8 Tax Investigations Statistics – Sep 2024 Update

At Pure Tax, our Tax Investigation specialists make it their mission to keep up-to-date with all the latest statistics and investigative approaches being taken by HMRC, for the benefit of our clients, especially COP9 and COP8. We know that even a routine HMRC enquiry/ Compliance Check can pile on the pressure for entrepreneurs and businesses; serious civil tax investigations dig deeper and often rattle clients. Our team fully understand this and work hard to provide peace of mind for our clients, being the trusted ‘buffer’ between them and HMRC.

Amit Puri leads our Tax Investigations & Disputes practice. He is a fully qualified former senior Inspector of Taxes with HMRC and has previously written several articles regarding HMRC’s serious tax investigations and the statistics, following several Freedom of Information Act 2000 requests to HMRC.

Here, Amit shares the latest Code of Practice 9 (COP9) and Code of Practice 8 (COP8) tax investigations’ statistics which include the 2023-24 figures, straight from HMRC, and shares his insights on what they mean.

FIS Tax Investigations Background

As previously outlined in our articles, HMRC investigations carried out under Codes of Practice 9 and 8 are comparatively intensive and resource hungry. Without careful and experienced handling, a client’s interests cannot be fully protected and the processes managed with certainty.

HMRC are looking for a financial recovery, i.e. lost taxes, statutory interest for the late payment of those taxes, and typically large penalties for failing to submit correct tax returns or failing to notify HMRC that taxes were payable. In addition to this, HMRC will usually seek to name and shame clients publicly i.e. their non-financial weapon, using Publishing Details of Deliberate Defaulters powers.

Which Tax Investigations?

A COP9 is a civil investigation of suspected tax fraud, where recipients of such tax investigation notices are challenged as to having acted with deliberate/fraudulent intent. They are then given an opportunity to admit tax fraud at the outset (at high-level) as part of being able to voluntarily disclose the details. They must disclose all the background and history, compute the taxes payable, the late payment interest and penalties payable thereon, and all at their own cost.

HMRC’s framework in these circumstances allows people and businesses to commission suitably comprehensive disclosure reports, usually prepared by seasoned tax investigations specialists, instead of lengthy, in-depth and intrusive investigations by HMRC in correspondence and meetings, which can run on for many years.

We have also queried statistics relating to COP8 investigations again, where large amounts of tax are considered to be at stake but not necessarily due to tax fraud. These are usually reserved for cases of mass-marketed avoidance and/or bespoke tax planning, where HMRC is likely to have made a discovery of historic tax risks as a result of uncovering new information. It may also be the case that HMRC are acting on intelligence received (e.g. from unhappy family members, (ex) business partners, domestic or foreign banks). These investigations also typically span numerous tax years and accounting periods for businesses.

COP9 and COP8 tax investigation(s) are carried out exclusively by HMRC’s Fraud Investigation Service (FIS), formerly Specialist Investigations (and many older names). These are non-routine civil interventions, with a view to financial recovery (as opposed to Criminal Investigations where the ultimate objective is a prosecution). FIS investigators are often referred to as the ‘elite’ of HMRC inspectors due to the amounts of tax involved, the number of years and accounting periods involved, typically fewer than the number and calibre of the professional advisers representing the individuals and/or businesses.

• Certainly, one cannot expect to reply to these investigators once or twice to bring about swift conclusions. The investigations are usually much more involving, because HMRC invest significant time in the preparation, carrying out internal and sometimes third-party checks well in advance.
• There are considerably fewer of these specialist investigators up and down the country compared to the number of non-specialist inspectors (for example, those operating in other front-line directorates like Wealthy & Mid-sized Business Compliance (WMBC) and Individuals & Small Business Compliance (ISBC). Those directorates make up the vast majority of HMRC’s investigative personnel.

How do these Tax Investigations differ?

COP9 Notices of Investigation typically send shivers down the spines of recipients given the clear allegation of suspected tax fraud. Usually, if the person has not sought out the COP9 process voluntarily (to secure immunity from a criminal investigation and potential prosecution). Then after exploratory conversations with their advisers they normally accept HMRC’s offer which is that they confirm the tax frauds at high-level.

Then commission a detailed report (at their own cost) to bring out what happened, when, why, how, with whom, plus evidence and figures etc. From my experience, most tend to opt to make full disclosures to safeguard their positions – which is what HMRC bank on!

COP8 Notices of Investigation are comparatively underrated because HMRC don’t always explain what their interest is at the outset. So in many cases, they appear similar to more routine looking enquiries. However, as things progress clients and accountants tend to realise that HMRC’s investigators are looking at transactions / matters concerning periods that are several years old and are ready to force their hand by using formal Information Notices to gather facts and evidence.

They even approach third parties with relatively less discourse. These investigators are well equipped to suspect/allege careless behaviour and sometimes even deliberate actions/fraud, so as to confirm their reasoning for looking at older periods and any intentions to raise assessments if their investigations are resisted, or delayed etc.

Those with experience of managing this type of tax investigation and others who have witnessed them will be familiar with the two completely different approaches. It follows that in a COP9, a client and their advisers can and should take control of the case by securing the disclosure process, that is, investigating matters in detail themselves and approaching third parties themselves, e.g. suppliers, customers, banks etc. if necessary. They can and should manage HMRC’s expectations regarding timeframes, progress, and the making of payments on account.

Conversely, in a COP8, HMRC are investigating from the outset, that is, they are asking the questions to confirm the risks they’ve identified and identifying evidence to support that (or sometimes to support clients’ arguments/contentions). From experience, we would say that a COP8 is more difficult to manage. Due to the uncertainty in not always knowing what HMRC are thinking and doing and why add to this, their ability to investigate using third-parties directly – the outcome of which can result in reputational damage.

Latest (2023/24) Statistics – Updated on 9 September 2024

COP8	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
Cases opened	258	271	352	176	669	212
Cases closed	380	328	240	279	535	268
Yield £millions	£118.5	£115.2	£56.0	£70.2	£79.1	£83.2
COP9	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
Cases opened	438	425	363	341	361	268
Cases closed	512	528	540	401	592	618
Yield £millions	£95.8	£121.3	£99.0	£104.3	£147.3	£338.4*

 

Note: For the first time, HMRC have confirmed in writing that “the interest, penalty, and yield figures do not capture the full amount of yield from these cases as a proportion of the yield is allocated to other business areas in HMRC”

Also, that “the total yield from COP 9 delivery in 2023 to 2024 was significantly higher than in 2022 to 2023 as it includes a particularly large settlement being reached during the period”. *You will be able to identify this settlement by searching online, its HMRC’s largest at c.£652.6 million – which is excluded from the £338.4 figure shown above.

What do these tax investigations statistics mean?

The statistics obtained previously painted a mixed picture of priorities at HMRC and we covered them in detail in our previous articles. We believe, the man on the street reasonably expects that more specialist HMRC resources in areas like FIS would result in increased tax revenues (collected through their specialist action).

However, in recent years HMRC had managed to open fewer COP8 and COP9 tax investigations. Perhaps this was owing to the fact that a considerable number of experienced investigators had retired and were encouraged to retire early to meet budget cuts, or perhaps this was down to Covid-19.

• New COP8 and COP9 cases opened were much higher in 22/23, together doubling to 1,030 (previously: 517). This may have signified increased resources in FIS and/or newer ways of working and managing these tax investigations, but there is the huge decrease in 23/24.
• HMRC’s focus appears to have been on COP8 over COP9 this time. This may indicate they were not confident enough to allege suspected tax fraud in as many newer cases. Instead, they set out to investigate themselves under COP8 – not facilitating a disclosure – which of course takes a lot more time and effort for all parties.
• New COP8 investigations almost quadrupled to 669 in 22/23 (previously: 176), before drastically reducing in 23/24!
• COP8 revenues secured by HMRC in 2023/24 have increased despite opening and closing fewer investigations.
• COP9 revenues secured by HMRC in 2023/24 have increased significantly, despite opening far fewer investigations.
• The average COP9 revenues were £249k and £260k respectively previously. This suggested there was some hurry to close a lot of COP8 investigations, perhaps due to the length of time they had been running for… hence why the number of settlements had doubled by 22/23!
• Interestingly, despite there being 592 COP9 and 535 COP8 settlements in 22/23, the penalties charged in the tax fraud COP9 cases were almost quadruple at £29.7m compared to £13m! We were not surprised to see this, because COP9 cases centre around tax fraud, dishonesty and deliberate behaviour, whereas COP8 cases often include tax planning where one might not be culpable at all.
• In 23/24, if we exclude the one large COP9 settlement, the penalties from COP9 cases were still some 10x more than in COP8 investigations!

 

How we can help?

We believe it’s in a client’s best interests to discuss these types of tax investigations with an ‘independent specialist’ even if there are no discrepancies to disclose. The right help at the right time ensures that HMRC are effectively managed and enquiries / disclosures are concluded expeditiously.

Our team are experts at resolving contentious tax investigations and other HMRC issues accurately and efficiently, and we are highly adept at managing our clients’ interactions with HMRC to ensure processes run smoothly and that our clients’ interests are best protected at all times.

Importantly, we deliver that all-important trusted ‘buffer’ between our clients and HMRC during disclosures, and an in-depth and intrusive tax investigation.

Get in touch to learn more about how Amit and the Tax Investigations and Disputes team have successfully guided clients through the COP9 or COP8 investigation processes.

Learn more about how we have helped our clients with tax investigations and disclosure matters through their kind feedback here.

See our tax investigations FAQs here.