Letter from HMRC's Fraud Investigation Service? What it means

The Fraud Investigation Service, usually shortened to FIS, is the part of HMRC that handles its most serious and complex cases. Despite the name, much of its work is civil, not criminal. Civil means HMRC is trying to collect tax, interest and penalties, rather than prosecute anyone in court.

FIS officers are experienced investigators. They tend to prepare carefully before they write, and they usually hold more information than the letter reveals. That is why the first reply matters so much.

Most FIS letters fall into one of three groups. The letter itself normally says which applies.

• Code of Practice 8 (COP8). A civil investigation where HMRC believes there may be a significant loss of tax, often from avoidance schemes, offshore matters or complex arrangements. Fraud is not usually alleged at the outset. How COP8 works.
• Code of Practice 9 (COP9). Used where HMRC suspects fraud. You are offered a formal route, the Contractual Disclosure Facility, to make a full disclosure in return for protection from criminal investigation. Our sister site cop9tax.co.uk explains it.
• An enquiry or information request. FIS may also take over an existing enquiry, or send a formal notice asking for documents, known as a Schedule 36 notice.

HMRC rarely writes without a reason. Common sources include information from UK banks, data shared by overseas tax authorities, disclosures by scheme promoters, tip-offs from third parties and HMRC’s own data-matching system, called Connect. It also watches public sources such as Companies House, the Land Registry, news sites and public social media.

None of this means HMRC has reached a view. It means it has questions, and it expects them answered properly.

• Note any deadline in the letter and keep the letter safe.
• Do not call HMRC to “just explain”. What you say on that call can be recorded and relied on later.
• Keep every record, including emails and computer files. Do not delete or tidy anything up.
• Keep filing returns and paying tax on time. HMRC sees ongoing compliance as a sign of good faith.
• Do not move, sell or transfer assets without advice.
• Be cautious about relying on whoever set up the arrangement HMRC is asking about. They may have a conflict of interest.

We read the letter with you, work out which procedure HMRC is using and what it is really asking. We can become your authorised agent, which means HMRC deals with us rather than you. We then set the strategy, including how best to engage with HMRC, and make sure HMRC hears from you within its deadline.

Every case is different, and nobody can promise how one will end. But the earlier you take advice, the more options you usually have. Your first call is free and confidential, and everything you tell us is treated in strict confidence, subject to our legal and regulatory obligations.