HMRC 'investigation where fraud is not suspected': what happens next

“Investigation where fraud is not suspected” is the heading HMRC uses for Code of Practice 8, or COP8. It is the procedure the Fraud Investigation Service follows for civil investigations. Civil means HMRC wants to recover tax, interest and penalties, and is not starting the case with a view to prosecution.

HMRC uses COP8 where it believes there may be a significant loss of tax. It is mostly used for tax avoidance schemes, offshore matters and complex arrangements. It applies to individuals, companies, partnerships, LLPs and trusts, and to every tax HMRC collects.

The Code itself makes clear that HMRC can change course. If it comes to suspect fraud at any point, it can move the case to Code of Practice 9, its civil fraud procedure, or to a criminal investigation. The Code also warns that knowingly making false statements can lead to prosecution.

So the starting point is reassuring, but the way you respond matters. Guessing at answers, giving a quick explanation on the phone, or signing documents you have not checked can all cause problems later.

Most COP8 investigations follow a similar path, though every case is different.

1. The opening letter names the issues HMRC wants to look at and may suggest a meeting.
2. An opening meeting, which is voluntary. HMRC uses it to ask questions and form a view. Preparation is essential.
3. Information requests, informally at first and sometimes by formal notice. See our page on Schedule 36 notices.
4. A payment on account, which is money paid towards the likely bill before it is agreed. It can stop more interest building up.
5. Negotiation and settlement of the tax, interest and penalties, often with a Certificate of Full Disclosure for you to sign.

Investigations often take 18 months or more. You can read the full process in our guide to how COP8 works.

• Co-operation is voluntary, but HMRC can use formal powers if you do not co-operate, and co-operation is what earns penalty reductions.
• You can bring an adviser to every meeting, and you do not have to sign HMRC’s meeting notes.
• You can appeal against most formal information notices.
• If HMRC takes too long without good reason, you can ask the tax tribunal to direct it to close the enquiry.

We review the letter and your records, become your authorised agent so HMRC deals with us, and agree a strategy with you, including how your full position is presented completely and accurately to HMRC. We prepare you for any meeting and sit beside you, and we check every figure and document before anything is agreed.

No outcome or penalty level can be promised. But taking advice before you reply usually gives you more options. Your first call is free and strictly confidential.