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While HMRCs drive to tackle evasion and avoidance may be old news, it looks as though we are now seeing a further ramping up of compliance activity and investigations from HMRC elite investigation units: Specialist Investigations (“SI”) and the Fraud Investigation Service (“FIS”).
We’ve seen an increasing number of clients approach us to assist with civil fraud and avoidance investigations. The common theme in the majority of these cases involve offshore assets and structures as HMRC now starts to use the information it has begun to receive from the various automatic information sharing agreements entered into over the last 4-5 years.
Many of those approaching us in the last 6 months with an opening letter from SI/FIS have historic tax liabilities relating to offshore assets or structures. It's interesting to note that some of these clients were in the process of reviewing their historic arrangements with a view to making a disclosure to HMRC but were 'beaten to the punch' by the inspector (the moral of the story here is to get to the taxman before he gets to you because the impact on any financial penalties can be significant!)
What are the risks and issues?
Cop 9 - This is HMRCs most serious civil investigation and so real care needs to be taken by clients on how they respond. The risks for getting it wrong can be significant.
The process requires a client to make an early admission of the issues he/she believes have not been previously disclosed to HMRC. As this disclosure often sets the tone for the rest of the investigation, getting it right is important. Equally, if a client has nothing to disclose to HMRC (we’ve got experience where HMRC have incorrectly opened a CoP9 investigation) making a denial while still protecting the risks of an adverse reaction from HMRC is vital.
Our free video takes you through the issues and risks that clients need to be aware of when faced with a Cop9 investigation and the typical stages involved.
Cop 8 - This is an investigation which focuses on tax issues other than those involving serious tax fraud. We’ve seen a number of these in the recent past where HMRC is using the information it has obtained to question a client’s residence or domicile status or query the UK tax position relating to an offshore structure or assets.
While at the outset there is no suspicion on HMRCs part of any fraudulent or deliberate behaviour, care needs to be taken in responding to HMRCs requests for meetings and information. We’ve had to pick up a few cases where clients have got this wrong and either ended up in potentially difficult penalty position or, in the worst cases, a switch to a CoP9 investigation.
Our free video describes the stages of a normal Cop8 investigation and how to respond effectively to HMRC.