COP9 INVESTIGATION

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WHEN HMRC have evidence of tax evasion

If you are visiting this page, you may have received a letter from HMRC about COP9  Investigation. HMRC Fraud Investigation services will only issue  COP9 letter to an individual in cases where, up to that date, no criminal proceedings have been brought against taxpayer. When COP9 Tax Investigation letter is issued, HMRC have evidence of tax evasion and its not speculative. It sounds distressing and scary as you read the letter through. As Tax Accountants and specialist in tax investigations, we have spent number of years in industry representing clients who have been subject to COP8, COP9 investigation and Money Laundering offences. Apart from just giving you a general advice, we are going to detail the process and what you should and should not do. Read our FAQ below to know what you need to know about Code of Practice 9 Tax Investigation. 

FAQ

We Are Here To Help You With Any Questions You May Have

When you receive COP9 Investigation Letter, do not panic and read through every line. It would give you an idea what HMRC is looking for. Code of Practice 9 Tax Investigation Letter is not an ordinary investigation which is commenced just after an initial inquiry or HMRC have suspects tax evasion. There is a hierarchy for approval and HMRC officers must go through a proper system before a COP9 Investigation letter is approved to be sent to taxpayer. HMRC must have done their primary investigations and they have proof that tax for more than £100,000 have been avoided or there are too many discrepancies which may result in additional tax of £100,000 or more.

This is an interesting question and answer to this is, HMRC will never ever tell what proof they have against taxpayer. Challenging COP9 Tax Investigation letter on wrong issuance has not been successful in tax tribunals and taxpayers must fill in the forms and tell HMRC about any discrepencies or untaxed income and gains. Most of the times, COP9 Tax investigation is in response to taxpayer or their representative’s noncompliance and non-cooperation attitude. And this type of conduct leads HMRC to think about suspected tax evasion. In some of the cases HMRC had been informed of tax evasion by third parties. HMRC have a dedicated page to report tax fraud and tax evasion anonymously. The last source is ‘Connect’ – a state of art software which can make a profile of tax payer by scanning their banks, credit cards, DVLA records, Land Registry Records and requesting any details world wide from The Organisation for Economic Co-operation and Development (OECD) by using their automatic exchange portal.

HMRC have got access to automatic exchange portal of OECD. This portal is specially designed to exchange details about taxpayers in different tax jurisdictions. Anyone who is a British national or domiciled in UK, is subject to British Tax, and HMRC can access details of their moveable and immovable assets including bank accounts and properties. Not all taxpayers, get a letter of Code of Practice 9 when HMRC have received information through this portal. Most of times, they will be asked to file a disclosure and disclosed any undisclosed income and assets without opening an inquiry or investigation. Read more about Common Reporting Standards – guidelines of exchanging data of taxpayers between world tax jurisdictions.

It is not normal investigation and next 12 – 18 months will be incredibly stressful. HMRC has asked you to file a disclosure within 60 days or deny that you have committed any tax evasion or any tax fraud. You would need an accountant to calculate the amount of tax you owe in actual to HMRC. In the disclosure you must give estimated figures and write down about how this happened. You are the best judge to estimate income which you have failed to disclose over number of years. Accountant can calculate tax and consider other factors. Normal accountants who do not have experience in such investigations will fail to recognise untaxed income and may rely on the documents already submitted to HMRC by previous accountants. We would advice to talk to specialist accountants and see if they can identify the untaxed income by going through documents and interviewing you about your business and events. A lawyer on the other hand can only advice you on law, he would still need an accountant to analyse income and calculate tax.

HMRC can go back up to 21 years of trading history. But if you have had different business in last 20 years, your advisor or accountant can communicate HMRC about a starting point. Its job of your tax accountant to bring down the tax investigation to specific years, so he can concentrate of the actual period when income have not been disclosed in accounts and tax returns. As a rule of thumb, HMRC will ask the last year when all tax affairs were in order. To determine this our tax accountants look for the earlier year and if the see any discrepancy they will go further until they come to a point where tax affairs are in order and agree the tax years to be investigated with HMRC. If you have been insolvent or bankrupt in the past, the start date will be from the date you started business after bankruptcy.

Under COP9 Tax Investigation guidelines, you must send CDF back either accepting the offer or denying the offer. If you do not send the form back, HMRC will take it as denial from you. Fraud investigation service can only close investigation if they accept your explanation along with the CDF form. Not submitting CDF is not an option. Accepting tax evasion and submitting CDF offer form will give you immunity from prosecution. If you do not send the CDF form, HMRC will start investigating further and may commence a criminal investigation with a view to prosecution.

Code of practice 9 Tax Investigation is all about cooperation with HMRC. From very first interview to the point where out standing tax is paid to HMRC, you are expected to fully cooperate with your accountant, representatives and HMRC officers. Your cooperation will determine the penalty. Minimum penalty which HMRC can charge is 35% and can go up to 150%. If there are other matters which you would need to disclose, this is the opportunity to come clean. We always interview our clients who have received COP9 letter, to see quantum of work involved. It is not normal investigation, and it will not be common analysis and accounting. For further details call our office.

You should let HMRC know about your partner and tell them how it happened. Normally, if any of our client is in such situation, we will advise to let HMRC know before hand to save time. HMRC may allow your partner to agree the tax figures instead of opening a new investigation. Every case has its own characteristics and will be judged on its own merits. If you are in a situation where you are unable to draw a line where to start, call our office for free evaluation of your case. 

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