COP8 also known as Code of Practice 8 – serious tax investigation

Tag Archive for: COP8

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ICAEW Unhappy With HMRC’s Plan To Register and Monitor Tax Advisers

HMRC’s Plan To Register and Monitor Tax Advisers

The draconian HMRC interaction register will drive many professional tax advisers out of the market and impose considerable extra costs on honest majority, warns ICAEW. There is major concern across the profession about the new HMRC interaction register, set to come into effect from April 2026.

Government proposals to create a mandatory register for any tax advisers involved in ‘interaction with HMRC’ will harm the tax system, ICAEW said, and make the UK one of the most difficult tax environments in the world for practicing tax professionals.

So the ICAEW has called on the government to reconsider its plans, which would introduce a legal requirement for tax advisers to register with HMRC, and introduce significant new penalties for advisers based on their clients’ underpaid taxes.

Penalties could be issued for any tax return where HMRC considers more tax is due, even if the tax adviser has not acted improperly. Draft legislation for the Finance Bill 2025/26 also proposes the introduction of a strict liability criminal offence for failure to disclose a tax avoidance scheme, and even partners is limited liability partnerships could be caught if they do not file their tax return on time.

One of the biggest problems for the various professional bodies representing tax advisers, accountants, lawyers and conveyancing solicitors, is the ‘catch-all’ nature of the proposals and use of the very vague ‘interaction with HMRC’ criteria as the government’s definition of who is affected. The use of the word ‘interaction’ is also widely questioned.

ICAEW said that as drafted, the legislation misses the target. On mandatory registration for all tax practitioners who interact with HMRC, ICAEW said ‘the plans amounted to quasi regulation, as the eligibility criteria would allow for monitoring against a prescribed standard. It could also ban a firm from providing tax advice if just one of its partners was late in filing their own personal tax return’.

ICAEW called for mandatory registration to be deferred until April 2027 allowing time for more consultation, adding it was ‘supportive of policies that aim to raise standards in the tax market and drive out the bad actors who cause considerable harm to the tax system. However, these proposals don’t achieve those objectives and would not improve standards in the tax market’.

Alan Vallance, ICAEW chief executive (pictured), said:

‘These proposals will simply add costs and burdens to businesses, some of whom may find they can no longer access the tax advice they need.

‘Under these plans, the UK will become the most difficult tax environment in the OECD, with tax advice un-affordable and inaccessible alongside a negative impact on our long-term tax compliance culture.

‘They will make it harder for people to access the tax advice they need, which means the wrong tax will be paid, costing both businesses and HMRC time as they try to resolve matters – taking their focus away from growth.

‘These proposals undermine the prospects for growth when we need it more than ever, and we are calling on the government to revisit these plans.’

ICAEW warned that the ability for HMRC to access confidential client papers via advisers where there is no dishonesty risks making the UK unattractive in the global market and could harm inward investment. ICAEW suggests that the legislation should be reframed to catch only actions that amount to misconduct by the tax adviser.

Another concern is that there will be a lower bar to penalise tax advisers for any tax return where HMRC considers more tax is due, even if the adviser has not acted improperly, could make tax advisers unlikely to take on clients with large tax liabilities such as large companies or high net worth individuals, as they would consider the risk too high.

The Law Society added: ‘The definitions of “tax adviser” and “interaction with HMRC” are so broad that many legal professionals who do not hold themselves out as tax specialists, or who are not in any real sense tax advisers, would be caught.’

HOW CAN PURE TAX HELP?

At Pure Tax our Tax Investigation & Disclosure specialists are industry recognised and have dealt with hundreds of contentious situations with HMRC over the years. We are adept at managing interactions with the tax authorities to ensure that the investigation and disclosure processes run smoothly and that your interests are best protected.

Get in touch with us for any HMRC related needs
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Tax Investigations Lack a Deterrence Effect – Bloomberg Tax Article – Tax Evasion

UK’s Serious Civil Tax Investigations Lack a Deterrence Effect

Tax Evasion and HMRC’s Fraud Investigation Service

In this article for Bloomberg Tax we covered how HMRC’s Fraud Investigation Service, with some 5,500 new investigative officers promised in the UK’s recent budgets and the June Spending Review, are still expected to “do more, with more” to increase the deterrence effect of their most serious civil tax investigations.

Anecdotally, it seems the chains have still not come off in the case of HMRC’s most aggressive tax investigations, carried out by the Fraud Investigation Service, or FIS, where large amounts of tax are believed to be at risk and/or suspicions of tax fraud are alleged; predominantly working on tax evasion cases.

Despite an impressive responsibility, staff numbers have stayed stubbornly close to or below 5,000 across the country. Anecdotal evidence shows that the public is not afraid of FIS civil investigations and is seldom aware that a person has been subject to one—so the low number of investigations has a poor deterrence effect.

Over the 2024-2025 period, only 450 new such investigations were commenced (down from 480 in the 2023-2024 period), although FIS still managed to secure almost £190 million ($257 million) in revenue.

Here is the link to the full article at Bloomberg Tax; read on to learn more.

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HMRC Code of Practice 8 (COP8) Investigation: When HMRC Comes Knocking

“Three months ago, I took a call from a business owner who sounded calm—almost too calm. He’d just received a brown envelope marked Code of Practice 8 ‘Notice of Investigation’ from HMRC. He thought it was a routine enquiry. It wasn’t.

What followed was an eighteen-month deep dive by HMRC’s Fraud Investigation Service, with suspicions over offshore business and tax arrangements, and the very real risk of the case escalating to a criminal tax investigation with a view to prosecution. And here’s the kicker: he hadn’t done anything he believed was dishonest or evasive.

His story isn’t unique. In my experience, COP8 letters rarely land without consequence—and never by accident.

For comprehensive guidance, see: https://pure-tax.com/tax-investigation-hmrc-investigation/code-of-practice-8-cop8/

COP8 Tax Investigations: What HMRC Is Really Looking For

If you’ve received a COP8 letter from HMRC, it means they suspect your tax affairs are complex, potentially involving tax avoidance, or worse, tax fraud.

Unlike a COP9, there’s no immunity here from a criminal tax investigation. So no automatic shield from potential prosecution. HMRC’s Fraud Investigation Service is allowed to escalate a COP8 investigation to a full-blown criminal case at any point. That uncertainty creates real professional, financial and reputational risks.

I’ve seen HMRC contact banks, suppliers, customers—even ex-employers—when they think someone’s not cooperating fully. You don’t want them chasing information from third parties on your behalf.”

 

See the full article published on LinkedIn: HMRC Code of Practice 8 (COP8) Investigation: When HMRC Comes Knocking | LinkedIn

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HMRC action against third parties including agents and advisers

HMRC action against third parties including agents and tax advisers

Published by HMRC Enquiries, Investigations & Powers magazine, August 2024 edition

 

We recently asked HMRC for statistics and information on penalties and other sanctions they could and should have levied on deserving third parties for bad behaviour. We wanted to gauge both HMRC’s powers and appetite in the pursuit of advisers.

We acknowledged that HMRC can and do raise tax assessments on people even where they have taken ‘reasonable care’ with their own tax affairs. However, this was in cases where the errors/irregularities were due to the ‘careless’ or ‘deliberate’ actions of someone other than them. We asked how many such instances there were in the past five years, annually?

We also acknowledged that HMRC can and do issue penalties on persons other than the taxpayer, where those persons had ‘deliberately’ caused inaccuracies or withheld information. We asked how many such instances there were in the past five years, annually, and the value of the penalties? These penalties will have been charged under Paragraph 1A of Schedule 24 to the Finance Act 2007.

Please see the full article here, as published: EIP Article – HMRC actions against agents and advisers, in the August 2024 edition of the magazine. Please do consider taking out a full subscription at: hmrctaxinvestigation.co.uk

 

We believe it’s in a client’s best interests to discuss these types of matters 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 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 in-depth and intrusive investigations.

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; see our tax investigations guide here.

See our large business/corporate enquiries guide here.

Learn more about how we have helped our clients through their kind feedback here.

See our tax investigations FAQs here.

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What is a serious tax investigation: COP9 and COP8

Serious tax investigation: COP9 and COP8

Introduction

At Pure Tax Investigations, our Tax Investigations specialists make it their mission to keep up-to-date with all the latest statistics and operational approaches being taken by HM Revenue & Customs (“HMRC”), for the benefit of our clients. Even a routine HMRC self-assessment enquiry can pile on the pressure for entrepreneurs and businesses, so a serious tax investigation digs deeper and often rattles clients. The latter are in-depth and intrusive to say the least. Our team fully understand this and work hard to provide peace of mind to our clients, acting as a trusted ‘buffer’ between them and HMRC.

I lead our Tax Investigations & Disputes practice; a fully trained and qualified former senior Inspector of Taxes with HMRC, and who regularly writes articles for leading publications regarding HMRC and the tax disputes world. After over a decade there, I left for the private sector in early 2015 to use my extensive tax investigations and disputes resolution experience; am definitely not a bookkeeper nor an accountant… our focus is on finding the light at the end of the tunnel – especially in serious tax investigations.

The background

It goes without say that HMRC investigations carried out under their Codes of Practice 8 and 9 are emotionally intensive and resource hungry. Without careful and experienced handling a client’s interests cannot be fully protected and the formal processes managed with more certainty. HMRC are looking for lost taxes, interest for the late payment of those taxes, and typically large penalties e.g. failing to submit correct tax returns or failing to notify HMRC that taxes were payable. In addition to this, HMRC usually seek to name and shame clients publicly – their non-financial weapon.

Which serious tax investigation?

COP9 introduction

A civil investigation under Code of Practice 9 (COP9) is into suspected tax fraud, where recipients of such investigation notices are challenged with having acted with deliberate/fraudulent/dishonest intent. They are then given an opportunity to admit tax fraud at the outset (at high-level, within 60 days) as part of then being able to voluntarily disclose the full details thereafter. They must disclose all the background and history of their dealings i.e. the what, why and how, compute the taxes payable, the late payment statutory interest thereon and penalties payable thereon, and all at their own cost.

HMRC’s COP9 framework requires people and businesses to commission suitably comprehensive disclosure reports, usually prepared by seasoned tax investigations specialists, instead of lengthy, in-depth and intrusive investigations from HMRC via correspondence and meetings, which can of course run on for many years. In terms of civil interventions, this is the most serious tax investigation.

The key takeaways here are that by meeting the qualifying criteria, full protection from a criminal tax investigation is secured, and the avoidable ‘investigation’ becomes a much more manageable ‘disclosure’ instead.

COP8 introduction

A civil investigation under Code of Practice 8 (COP8) examines large amounts of tax which are considered to be at stake but not necessarily due to tax fraud/evasion. These are usually reserved for cases of mass-marketed avoidance schemes and bespoke tax planning too that’s aggressive. HMRC will have identified potential historic tax losses (as a result of uncovering new information, or is hoping to).

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 personal tax years and/or corporate accounting periods for businesses. Whilst also a civil intervention, its still a very serious tax investigation.

It is rare but not impossible for a COP8 investigation to change into a COP9 one.

COP9 and COP8 investigations are carried out exclusively by HMRC’s Fraud Investigation Service (FIS), formerly known as Specialist Investigations (and many other names in the past). These are non-routine civil interventions, with a view to financial recovery (as opposed to Criminal Investigations where the ultimate objective is a prosecution and likely confiscation action). By non-routine I mean- the investigators are not easily deflected by statutory enquiry windows having closed for certain periods/years and the returns.

·        FIS investigators are often regarded as the ‘elite’ of HMRC inspectors due to the amounts of tax involved, the number of years and accounting periods involved, and typically the number and calibre of professional advisers representing the individuals and businesses. 

·        Only a few months ago HMRC advised there were some 4,994 (4,427 last year) full-time equivalent FIS staff. That was an increase of nearly 13% which I suspected was driven by the need to tackle high-end covid-19 related frauds e.g. furlough claims, and to generally prop up the Exchequer further.

·        Certainly, one cannot expect to reply to these investigators once or twice to bring about swift conclusions like we usually do with routine enquiries. FIS investigations are much more involving, because HMRC invest significant time in preparation, carry out internal and sometimes third party checks in advance, and focus on far fewer (but larger) cases.

·        There are comparatively much fewer specialist FIS investigators up and down the country, than 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”). These two directorates make up the vast majority of HMRC’s investigative personnel.

 

COP9 Notices of Investigation understandably send shivers down the spines of recipients given the clear allegation of suspected tax fraud. Usually, if the person has not voluntarily sought out the COP9 process (to secure immunity from a criminal investigation and potential prosecution), then after exploratory conversations with and advice from their specialist advisers they accept HMRC’s offer: that they admit & confirm the tax fraud(s) at high-level and then commission a detailed report (at their own cost) to explain what happened, how, when and why… with whom, plus provide evidence and figures etc.

From my own experience in HMRC’s FIS and outside in practice, most people decide to make full disclosures to safeguard the civil investigation/disclosure status and lower penalty positions – which is what HMRC bank on!

COP8 Notices of Investigation are comparatively underrated, because HMRC don’t allege tax fraud at the outset, and don’t always explain what their focus is. But these are not routine enquiries; clients (and accountants) realise quite quickly that the investigators are looking at transactions / events concerning periods that are several years old and are confident in using formal Information Notices to gather the facts and evidence. They threaten and use penalties for failure to comply with Notices and approach third parties with less discourse too. They really put one to task!

It should be clear that COP9 and COP8 investigations have a completely different approach, but the FIS investigators are well equipped to identify and challenge ‘careless’ and ‘deliberate’ behaviour so as to confirm their reasoning for looking at older periods. They aren’t afraid to raise tax and penalty assessments if their investigations are resisted or delayed.

It follows that in a COP9 case, the client and their adviser:

·        must take control by securing the disclosure process (where appropriate), that is, investigating matters in detail themselves and approaching third parties themselves, e.g. suppliers, customers, banks etc to gather facts & evidence.

·        must manage HMRC’s expectations regarding timeframes for progress updates, the making of payments on account, and submission of the disclosure report and supporting work.

Conversely, in a COP8, HMRC are investigating from the outset, that is, they are asking the questions to confirm & test the risks they’ve identified. They will also identify & gather evidence to support their findings. From experience, I would say that a COP8 case is more difficult to manage due to the uncertainty in not always knowing what HMRC are thinking and doing and why, and their ability to investigate using third-parties directly – the outcome of which can result in reputational damage for clients.

Serious tax investigation statistics

An overview of COP9 and COP8 statistics obtained from HMRC, for the 2021-22 year:

COP9: 341 new investigations were opened; with 401 being settled; and some £140.3 million being recovered.

COP8: 176 new investigations were opened; with 279 being settled; and some £70.2 million being recovered.

Please read our latest article examining the fuller statistics and what the numbers could mean here.

Read more about HMRC’s Fraud Investigation Service’s approach to the serious tax investigations they carry out here.

How we can help?

We believe it’s in a client’s best interests to discuss these types of cases 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 investigations are concluded expeditiously, and that includes a comparatively more serious tax investigation too.

Our team are experts at resolving contentious tax issues accurately and efficiently, and 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. Handling a (civil) serious tax investigation is our speciality.

We deliver that all-important and trusted ‘buffer’ between our client and HMRC during their in-depth and intrusive investigations, and in voluntary disclosures. This is something our clients, who have worked with us through these types of investigations, have truly appreciated.

Read some of their kind feedback here.

Please do get in touch to learn more about me and our Tax Investigations and Disputes team and how we have successfully guided clients through the COP9 and COP8 investigation processes.

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