How an HMRC COP8 investigation works

HMRC uses Code of Practice 8 where it believes there may be a significant loss of tax. In practice it is mainly used for tax avoidance, complex arrangements and offshore matters.

HMRC can also take over an enquiry that another part of HMRC has already started. If your existing enquiry has been passed to the Fraud Investigation Service, COP8 may now apply.

HMRC usually has information before it writes. Common sources include:

• data from banks and overseas tax authorities
• disclosures of tax avoidance schemes
• information from other third parties
• open-source monitoring, such as Companies House, the Land Registry and public social media
• an existing enquiry being escalated

HMRC will usually say why it is investigating, though it does not have to. The letter names the issues it will focus on and warns that other issues may be added later.

HMRC's Code says the choice is yours. Co-operating can reduce penalties and usually makes the investigation quicker. Not co-operating does not end it — HMRC can still use its formal powers.

Take specialist advice on your obligations and how to present your full position completely and accurately.

The meeting can be held at your adviser's office, your business, an HMRC office or your home. HMRC takes notes; you can ask for a copy and you do not have to sign them.

You do not have to discuss matters in front of business partners or fellow directors.

HMRC will set reasonable deadlines for providing information and can extend them. It can also use formal legal powers — known as Schedule 36 notices — to obtain information from you and from third parties.

A specialist checks whether each request is lawful and proportionate before you respond.

HMRC may visit business premises by agreement, usually with notice. It will not visit your home unless you invite it, except for any parts used for business.

HMRC will ask for a payment on account — money paid towards the tax that may be due before the final figure is agreed. It can reduce late-payment interest and shows willingness to settle.

HMRC aims to agree the tax, interest and penalties with you. If agreement cannot be reached, it can issue formal assessments. You can appeal these within 30 days, either to an internal HMRC review or to the independent tax tribunal.

You may be asked to sign a Certificate of Full Disclosure, confirming you have told HMRC everything relevant. A knowingly false certificate can lead to criminal investigation. Never sign one without specialist review.

• Closure notice applications. If HMRC is taking too long without good reason, you can apply to the tax tribunal to direct HMRC to close its enquiry.
• Information notices. You can appeal against most Schedule 36 information notices sent to you. We check whether HMRC is entitled to what it is asking for.
• Certificate of Full Disclosure. At the end, HMRC may ask you to sign a Certificate of Full Disclosure and a Statement of Assets and Liabilities. These are serious documents and must be accurate. We review them with you line by line before you sign.

HMRC may monitor your affairs afterwards under its Managing Serious Defaulters programme. In cases HMRC treats as deliberate, your details may be published.

If HMRC suspects or finds evidence of fraud at any point, it can move the case to Code of Practice 9 (its civil fraud procedure) or to a criminal investigation.

If you think HMRC may already suspect fraud, our sister site explains COP9: cop9tax.co.uk.