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Code of Practice 8 investigations

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Specialist Investigations (Fraud and Bespoke Avoidance) Code of Practice 8

Code of Practice 8 (CoP 8) investigations are undertaken by HMRC’s Fraud Investigation Service (FIS) but, despite the title, in cases where tax fraud is not suspected. It is used where large amounts of tax are at stake and there are complex tax issues involved, often involving offshore trusts and companies.

What is it?

Although CoP 8 enquiries are begun with a view to recovering tax, interest and financial penalties through a contractual settlement, that position can change if during the course of an enquiry HMRC discover evidence of a serious fraud.

Consequently, it is important that any CoP 8 enquiry is taken seriously and specialist advisor is obtained.

We typically see CoP 8 being used where HMRC wants to challenge tax planning or structuring. For example, a business may have been set up with a number of companies in different tax territories, including the UK, with the intention that part of the overall business profits will be reported in a low tax jurisdiction. HMRC may look to test the operations of the UK business and the activities carried on in the UK to see if any of the companies set up overseas can be shown to be tax resident in the UK. Such an enquiry will involve a detailed examination of the activities carried on by individuals and entities, a review of documents, contracts and agreements and then analysis of how specific tax legislation, international protocols and double tax treaties apply to the circumstances. The close scrutiny of specialist investigators needs to be matched with experienced specialist tax advisors.

Another example of a typical CoP 8 enquiry can be seen where an individual organises his life, where he lives and travel arrangements in order to run a business in the UK but to be personally tax resident in another country. The rules on tax residence are set down in the legislation and involve specific rules around the time spent working in the UK or abroad, the significant ties formed through family, business and accommodation amongst others and importantly the number of days an individual spends in the UK. HMRC will look at passports, bank and credit card statements, phone records and anything that records the time an individual spends in the UK. The process can be daunting, time consuming and needs careful management.

How can we help?

CoP 8 enquiries can be difficult to manage for the inexperienced and are high risk. Trident has a team of specialists who are very experienced in dealing with CoP 8 investigations for clients and have experience of running such investigations for HMRC in their previous careers.

Don’t hesitate to ask us for advice if you encounter a Code of Practice 8 investigation. Please call any member of our team if you would like to discuss in confidence any concerns that you have.

HMRC information on CoP 8 can be found here .