Fraud Investigation Service Code of Practice 8
HMRC's Code of Practice 8 is operated only by the elite Fraud Investigation Service (FIS) branch of HMRC. FIS is staffed by highly trained, experienced, high-flying investigators. Fraud Investigation Service teams are based in each of the UK’s major cities.
The Fraud Investigation Service's Fraud and Bespoke Avoidance teams have a remit to deal with novel, unusual, and complex situations. It only takes up cases where the likely “yield” (of tax, interest and penalties) is over £500,000. Some of HMRC’s largest prosecutions started out as Code of Practice 8 "tax avoidance" cases; rather than as fraud cases. If FIS is involved it means the taxman believes the case is serious, large, and complex - and is going to lead to a large payment. Such enquiries can be very damaging; especially as most FIS COP 8 cases involve extensive approaches to 3rd parties (e.g. banks, business suppliers, customers, ex-employees, internet service providers etc).
Offshore issues feature prominently in many COP8 cases. Many Code of Practice 8 cases feature complex arrangements: such as the routeing of payments through non-UK companies; tax haven companies; multi-layer trusts and settlements; foundations and other opaque structures: often with an overseas dimension. FIS also issue COP 8 in significant cases involving tax residence issues (of companies and individuals) and domicile issues. Most investigations into suspected "tax avoidance" will be into so-called "off-the-shelf", or "marketed avoidance schemes" (e.g. such as offshore Employee Remuneration Trusts) or "bespoke" arrangements which the taxman considers artificial; contrived; of marginal commercial purpose; or where they suspect the real arrangements have been deliberately obscured.
FIS say that: "We will tell you the reasons for starting the investigation although we do not have to do so. Sometimes we cannot give you the reasons because they are confidential or they may prejudice our investigation". So it is not always clear at the outset why or what they are investigating. And their investigations can spin-off into new areas. An experienced specialist can often help uncover the reason for their initial concerns and contain the limits of the enquiry.
Unlike Code of Practice 9, Code of Practice 8 does not guarantee a civil investigation. Worryingly, in some cases where the FIS investigator has issued Code of Practice 8 they sometimes uncover further evidence that leads them to suspect tax fraud. They may then issue Code of Practice 9. Particular care needs to be taken to avoid the matter being converted to a criminal investigation.
FIS investigators have small caseloads and ample support staff (including qualified accountants and computer forensic experts), allowing them to devote considerable resource to each case. Dealing with a Fraud Investigation Service COP8 enquiry without your own specialist support can be very risky (partly due to the risk of Criminal Prosecution or naming and shaming); very expensive (as the tax and penalties bill is likely to be far higher than necessary); very time consuming; and highly stressful. Penalties can be up to 100% of the tax lost in non-offshore related cases, and since 1 October 2018 highly aggressive penalties can apply to offshore issues - of up to 300% or more of the tax underpaid!
How can Lynam Tax Enquiry Experts help me?
Not all HMRC Fraud Investigation Service cases produce penalties, and some do not yield any extra tax. However, persuading the world-weary and sceptical FIS investigators of this, and more crucially gathering and presenting the evidence to do so, is a difficult task. But it's one which we at Lynam Tax have devoted our professional lives to. In particular, Andrew Nutbrown (our Senior Consultant) is an ex-FIS Code of Practice 8 Group Leader.
If you, or your client, have received a Fraud Investigation Service Code of Practice 8 then you need specialist help now. Do not delay.
For a free, confidential, no obligation discussion with our Tax Investigation Experts, call
Paul Lynam : 0845 643 9997; or
Andrew Nutbrown : 0771 877 8710
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