When HMRC suspects that there has been a loss of tax as a result of tax fraud or tax evasion, HMRC’s Fraud Investigation Service (FIS) conducts tax investigations under Code of Practice 8 (COP8) or Code of Practice 9 (COP9). The FIS is the HMRC’s top investigation unit. During their investigation, personnel should be treated with respect and co-operated.
HMRC’s Code of Practice 8 is used for civil tax investigations, which may be conducted when the more severe Code of Practice 9 is not appropriate or in cases where there is no apparent dishonesty. Like taxpayers, take advantage of tax avoidance schemes to avoid tax. Such investigations aim to establish the facts and recoup any taxes, interest, and penalties owed.
If you received a letter from HMRC under Code of Practice 8, it means that Fraud Investigation Service has reviewed your tax return, accounts, and other sources and discovered wrongdoing. Therefore, they have decided to investigate further.
The letter describes the aim of their investigation and which areas they intend to focus on. However, they are not required to do so.
FIS inspector will invite you to a meeting to talk about the concerns and give you the chance to present your side of the story. HMRC expects you to be honest and forthright in your responses. It is your duty and responsibility to ensure that your answers are accurate to the best of your knowledge and belief. FIS inspector may decide to inspect your business’s records at your place of business.
During their investigation, HMRC has the power to bring charges against tax payer if they find evidence of fraud and deception. This may happen because there is no uniform format for a COP8 investigation – unlike COP9 – this may happen.
FIS inspector will request any information and documents it needs for the investigation. He will provide you with a reasonable time to submit whatever data you have.
Suppose the FIS inspector decides to pursue a financial settlement after an investigation. In that case, they will attempt to negotiate a settlement with you of the amount of tax, duties, interest, and penalties. According to what it has found during its research, HMRC believes you owe.
If the FIS inspector finds nothing wrong with your tax record, he’ll inform you that HMRC has finished the investigation.
If you disagree with the FIS inspector’s decision, you have 30 days to write and notify HMRC. This is referred to as an appeal to HMRC. You can also request a different officer from the one who made the decision to review your case before an independent tax tribunal. If you disagree with the review, you may appeal it to the tribunal.
The HMRC’s code of practice 9 is a set of standards that the HM Revenue and Customs (HMRC) uses when conducting tax investigations. The significant distinction between the code of practice 9 and criminal prosecutions is that.
In contrast, criminal investigations aim to prosecute taxpayers who have committed tax evasion, and the code of practice 9 is geared toward resolving issues via negotiation. The recipient of COP9 has the right to make a complete and accurate disclosure under the code of practice 9 (COP9) investigation of tax fraud procedure of all their intentional and unintentional conduct that has resulted in irregularities in their tax situation under a contract called a Contractual Disclosure Facility (CDF).
Once you receive an offer, you have 60 days to respond. If you don’t believe your actions resulted in a tax loss, you may sign and return the CDF Rejection Letter within the same time frame.
Only pick this option if you are sure that your deliberate conduct has not resulted in a tax loss. HMRC will begin a criminal or civil investigation if they suspect that you have committed tax fraud.
If you do not respond to HMRC within 60 days after receiving an HMRC offer, HMRC will consider this a conscious refusal to accept their offer. Before making any decisions, you should consult a tax investigation specialist.
If you make a complete disclosure of your planned behaviour, HMRC will not launch a criminal investigation. You must provide HMRC with a full, thorough, and correct statement of all tax errors and certified statements of your assets and liabilities, and all bank accounts and credit cards you have operated.
You’ll need to establish an agreement on what you owe, arrange payment, and confirm that everything is accurate.
To ensure that this work is done correctly, you will need the assistance of a tax advisor. HMRC may begin a civil or criminal investigation if your Outline Disclosure does not include everything they suspect you might have been involved in. You must get professional advice before finishing a disclosure report that turns out to be false or misleading and may result in a criminal investigation for submitting fraudulent documents.
You may also avoid other civil penalties such as bankruptcy and, in some circumstances, the publicizing of your Name and details if you co-operate fully with HMRC’s investigation.
If you do not co-operate, HMRC may begin an investigation that could result in a criminal investigation. Enforcement proceedings will be taken, including assessment increases for the tax and interest HMRC beliefs are owed. You will also lose your chance to gain the maximum reduction of any penalty that you may be owing. HMRC will seek much more significant penalties and initiate legal action to secure some or all of your assets.
Suppose HMRC assesses that you made a deliberate error. In that case, they may decide to monitor your tax affairs more closely in the future under the HMRC enhanced monitoring program called Managing Serious Defaulters.
If you are under investigation by HMRC, it is essential to seek professional help as soon as possible. Our tax advisors can provide the support and guidance you need to ensure that the process goes smoothly. We will work with you every step to make sure that you comply with HMRC’s requests, and we will be there to support you throughout the entire process. Contact us today to learn more about how we can help you with your HMRC investigation.