Code of Practice 8 enquiries involve complex matters, so it is crucial that the individual seeks specialist advice from day one to minimise their exposure. HMRC has sophisticated data-mining software to look for discrepancies and inconsistencies, including online information. Individuals should not underestimate HMRC’s ability to find things out.
Where HMRC considers that a significant amount of tax has been lost due to tax avoidance, they use Code of Practice 8 to investigate the individual involved. These enquiries are conducted by HMRC’s Fraud Investigation Service, which is responsible for both civil and criminal investigations.
HMRC opens the enquiry by sending the individual a letter explaining the reason for the enquiry, enclosing a copy of the Code of Practice 8. Knowing how to respond to the letter in the first instance is vital.
In most cases, HMRC invites the individual to a meeting. There is no statutory requirement for the individual to attend the meeting, however, it does depend on what the individual wishes to achieve. There is no right or wrong action here – every case is different.
Meetings can often be constructive and may even result in the enquiry being dropped straightaway. However, it is unwise for the individual to attend the meeting without professional support and first carefully reviewing recent events, tax planning and business interests. It is understandable that sometimes individuals feel intimidated or are reluctant to discuss their affairs with HMRC for various reasons. A professional adviser takes the strain so the individual doesn’t need to.
There is a danger that the Code of Practice 8 enquiry might uncover something that HMRC suspects could be deliberate or tax evasion. These enquiries often involve offshore assets or interests, such as trusts, companies and investments, and HMRC will wish to check that the relevant taxes were correctly paid.
If HMRC starts to suspect the individual of deliberately understating or not declaring all their income or gains, it could elevate the matter to Code of Practice 9, suspected tax fraud or, in the worst case, instigate a criminal investigation with a view to prosecution. It is key that professional advice is sought to minimise the risks.
Our tax dispute resolution specialists are experienced at dealing with HMRC in wide-ranging Code of Practice 8 enquiries. We ensure the individual’s situation is represented fairly and the best possible outcome reached.