HMRC’s approach to tackling complex tax issues and fraud
Posted on 12 Feb 2024, by Jeremy Johnson
HMRC continues to use Code of Practice 8 (COP8) and Code of Practice 9 (COP9) as its primary tools to investigate complex tax issues and fraud. HMRC opened more than 1,000 COP8 and COP9 investigations in the year to 31 March 2023.
HMRC uses COP8 to investigate large transactions, tax avoidance schemes, offshore transactions and other complex issues.
COP9 investigations are used where HMRC suspects tax fraud. HMRC’s updated COP9 guidance describes tax fraud as “any dishonest deliberate behaviour in respect of an individual’s liability to pay tax, duties or levies”.
HMRC carries out investigations under COP8 and COP9 on a civil basis with a view to recovering any tax, interest and penalties. However, HMRC may still commence a criminal investigation where an individual fails to co-operate with HMRC or makes false or misleading statements or provides false documents during the investigation.
Former Formula One boss Bernie Ecclestone’s recent dealings with HMRC highlight the possibility of civil investigations escalating to criminal ones. Eccleston’s case started as a COP8 investigation, however, information disclosed as part of that investigation led to HMRC opening a COP9 investigation. Ecclestone was then given the opportunity to make a disclosure under the Contractual Disclosure Facility.
During the COP9 investigation, Ecclestone was found to have dishonestly lied to HMRC in a settlement meeting. Ecclestone received a £650m fine and a 17-month suspended prison sentence after pleading guilty to making a false representation to HMRC.
This case demonstrates the importance of taking COP8 and COP9 investigations seriously. A person in receipt of a notice from HMRC notifying them that they are being investigated under COP8 or COP9 should seek independent professional advice at an early stage.
We have extensive experience in supporting clients with COP8 and COP9 investigations. Most of our team are former HMRC fraud investigators, so are well placed to guide clients through every step of the process. We often work alongside accountants and lawyers who have clients facing this issue.