Insights
What is COP8?
Have you been notified that you’re under a COP8 investigation?
Understanding the ins and outs of COP8 can be very confusing and stressful.
In this article, we’ll discuss what COP8 is, why these investigations are opened, the difference between COP8 and COP9, the COP8 investigation process, and the potential penalties involved.
What is COP8?
COP8 stands for Code of Practice 8. A COP8 enquiry is opened when HMRC suspects that they have lost a significant amount of money through unpaid tax, but they don’t suspect it is the result of deliberate fraud.
HMRC’s Fraud Investigation Service (FIS) leads COP8 enquiries, unlike regular routine compliance checks.
The goal is to determine whether the individual/business has underpaid tax, how they did so, and to recover the lost money.
What triggers a COP8 investigation?
There are many triggers for HMRC investigations and the choice to open a COP8 enquiry is caused by events like:
- Errors / inconsistencies in your tax returns.
- Information from financial institutions – banks, offshore trusts, etc.
- Participating in aggressive tax planning schemes.
- Tip-offs.
What is the difference between COP8 and COP9?
The main difference between COP8 and COP9 is the assumed intent of the person/business being investigated.
COP8 enquiries are opened when the suspected tax loss is assumed to be through carelessness or through “legal” tax planning measures.
COP9 is opened when deliberate, illegal tax evasion is suspected.
We have previously explored the difference between tax evasion and tax avoidance in more detail.
What happens during a COP8 investigation?
HMRC has published a document which provides information about the COP8 process. The exact COP8 process varies from case to case but in general, these are the steps involved:
Opening the enquiry
When HMRC opens a COP8 enquiry into your tax affairs, they’ll tell you via a formal letter. The letter outlines the scope of the investigation and the information that HMRC needs from you to help their investigation progress.
It’s important you don’t ignore their requests, but you should instruct a solicitor to guide you through the process so you are not led on a “fishing expedition” for documents that HMRC may not be entitled to.
Gathering information
HMRC will use the information you’ve given them, alongside extensive data sources at their disposal, to analyse your tax affairs.
They may come back to you several times to ask for more information or to clarify elements they are unsure of. Depending on the severity of the suspected tax loss, HMRC can investigate back 4-6 years usually.
You may also be asked to attend meetings and/or interviews so they can get more context for the documents they have. It really is very important to have a solicitor to guide you through these so you are always aware of your rights and responsibilities.
Outcome
HMRC will determine the outcome of the case. If your tax affairs are considered completely compliant with no issues, the investigation will be closed with no further action.
If they find you have underpaid tax (but not committed fraud), they’ll issue you with penalties.
If they believe you have actually committed fraud, then they will escalate the inquiry to a COP9 investigation, which is a more serious affair.
Appeals
If you’re unhappy with the outcome, you can choose to appeal HMRC’s decision. You can use their internal review process using a HMRC employee who was not part of the original investigation, or you can take it to a tax tribunal.
What penalties are issued under COP8?
HMRC may give you a penalty of 200% of the tax due, as well as the tax you owe plus the interest that has accrued since it should have been paid.
I’m under COP8 investigation – what can I do?
Being told you’re at the centre of a COP8 investigation can be alarming. It can be difficult to understand what is expected of you and what your rights are.
At Holborn Adams, our solicitor team can guide you through your COP8 investigation with ease. We have years of experience dealing with tax avoidance and evasion cases, so understanding the best way to tackle them has become almost second nature. We strive to secure an outcome with no penalties to you.
When you instruct a solicitor rather than an accountant, you’ll be covered by legal privilege (complete confidentiality), giving you the space to speak freely about your tax affairs without repercussions. You aren’t afforded this when you instruct an accountant. We can instruct accountants on your behalf, and they then become covered by legal privilege too, giving you the best of both worlds.
Please don’t hesitate to contact us for help with your COP8 enquiry.