HMRC Tax Investigations: Understanding nudge letters, COP8, COP9 and CDF forms

HMRC is ramping up its compliance and tax investigations to address the widening gap between expected tax receipts and the actual tax paid.

Between 2024 to 2025, the UK’s estimated tax gap sat at a whopping £59.2 billion, up £6.4 billion on the previous year, according to HMRC.

Accountants, solicitors and Independent Financial Advisers (IFAs) need to understand the implications of HMRC investigations, so they can delegate work to a specialist at the right time.

Failing to hire an expert tax adviser when it matters might lead to fewer options available, alongside a growing financial, regulatory and reputational risk.

HMRC nudge letter‘s What are they and why might you receive them?

HMRC nudge letters are informal warning shots sent to taxpayers when HMRC systems have detected inconsistencies in their tax reporting.

While this might not be a formal investigation, clients should thoroughly review their tax affairs and correct any mistakes to avoid further escalation.

Common targets for HMRC nudge letter campaigns include overseas assets, revenue from online marketplaces, self-assessment filers, property income and other discrepancies.

Ignoring a nudge letter may elevate the likelihood of a formal tax audit and increase penalties, so it is important an accurate response is provided within HMRC’s given window.

COP8 Investigations

A Code of Practice eight (COP8) investigation is a serious, deep-dive tax audit conducted by HMRC’s Fraud Investigation Service (FIS).

Where HMRC suspects a significant loss of tax through contrived tax arrangements, they might initiate a COP8 investigation to establish the facts and recover unpaid liabilities.

HMRC might trigger investigations if they’ve identified tax avoidance schemes, offshore tax risks or discrepancies between a taxpayer’s lifestyle and their declared income.

Where do COP8 and COP9 investigations differ?

The difference between COP8 and COP9 investigations is HMRC’s assessment of the taxpayer’s intent.

Where COP8 might be applied to tax avoidance and technical disputes, a COP9 investigation targets deliberate fraud and dishonesty.

In short, a COP 8 investigation means HMRC does not initially suspect fraud and dishonesty, so the investigation is aimed at fixing errors and reclaiming lost income. Sometimes, however, a COP8 investigation can become a COP9 if evidence of fraud is found.

On the other hand, COP9 investigations are triggered when HMRC strongly suspects deliberate tax fraud, with a business intentionally cheating the system with hidden income and deceit.

Although COP8 does not start with an allegation of fraud, those investigations should still be handled very carefully.

HMRC may well be approaching a COP8 investigation in the context of ‘this might be fraud,’ rather than ‘we think this is certainly fraud’, which is where COP9 starts.

Contractual Disclosure Facility (CDF) and the Outline Disclosure

While HMRC might strongly suspect deliberate fraud during a COP9 investigation, they grant criminal immunity to individuals who declare their dishonesty.

Acceptance of the Contractual Disclosure Facility (“CDF”) which forms the basis of the COP9 process must be done using CDF forms, which must be completed and returned to HMRC within a strict 60-day deadline, providing an ‘outline disclosure’.

Details about the nature of fraud, who was involved, the affected tax periods and what methods were used to mislead should be provided by clients.

Despite the tight 60 day turnaround, the disclosure is often one of the most important documents a taxpayer signs, with substantial consequences for mistakes.

For example, if a client forgets key details of the fraud in the disclosure or is too vague in their description, the outline disclosure can be rejected and the promise of criminal immunity scrapped.

Why is specialist representation needed during COP8 and COP9 investigations?

Specialist representation matters for these kinds of serious investigations, as individuals might inadvertently reveal an intent and spark a COP9 or criminal escalation.

While many solicitors and accountants might attempt to manage COP9 investigations internally, they often do not have the experience and legal training needed to protect their clients.

As these investigations are often carried out by HMRC’s elite FIS, with the boundaries of their legal powers regularly pushed, expert advice should be sought immediately.

inTAX experts can provide independent disclosure advice to clients caught up in high-stakes investigations, helping mitigate steep penalties and criminal liability.

The value of early specialist intervention

Every HMRC intervention requires a considered response to protect a client from the very beginning.

Engaging a tax specialist at the earliest opportunity can drastically impact the outcome of investigations.

By managing all communications with HMRC, our specialists can control a how client’s position is presented clearly, consistently and within the appropriate scope.

With HMRC often pursuing the most serious penalties first, how a client’s actions are explained can be worth hundreds of thousands, if not millions, of pounds.

Early intervention from our tax experts creates opportunities to minimise penalties and prevent unnecessary escalation.

If you have a client who is being investigated by HMRC, early specialist intervention can significantly change the outcome.