COP 8 and COP 9 are specific investigation procedures employed by (HMRC) in the UK, both designed to address suspected tax fraud cases.
Investigations can vary significantly based on their purpose, scope, and the organizations or agencies conducting them.
Different types of investigations serve distinct objectives and follow specific protocols.
Some common types of investigations include criminal investigations, financial investigations, workplace investigations, and regulatory investigations.
What are the main differences between both the investigations?
- COP 8: COP 8 investigations are used when HMRC suspects tax avoidance or aggressive tax planning. The focus is on examining the taxpayer’s tax arrangements and transactions to identify potential non-compliance with tax laws and exploitation of tax loopholes.
- COP 9: COP 9 investigations are initiated when HMRC suspects serious tax fraud. The primary purpose of COP 9 is to encourage voluntary disclosure by offering taxpayers the opportunity to come forward and provide a comprehensive and genuine disclosure of any tax irregularities.
- COP 8: Under COP 8, HMRC initiates a formal investigation and informs the taxpayer about the examination of their tax affairs. The taxpayer is encouraged to cooperate with HMRC during the investigation.
- COP 9: COP 9 offers a more cooperative approach. The taxpayer is invited to enter into the “Contractual Disclosure Facility” (CDF) voluntarily. They are provided with a specific timeframe to make a full disclosure of any irregularities, and the emphasis is on providing complete and accurate information.
- Potential Outcomes:
- COP 8: If HMRC identifies tax avoidance or aggressive tax planning during a COP 8 investigation, the taxpayer may be required to correct their tax affairs and pay any outstanding tax, along with potential interest and penalties. Criminal prosecution is not a direct outcome of COP 8, but HMRC may refer the case for a COP 9 investigation if they suspect fraud during the process.
- COP 9: The main benefit of COP 9 is that it offers immunity from criminal prosecution for tax-related offenses if the taxpayer makes a full and genuine disclosure. If the taxpayer fails to disclose all irregularities or provides false information, they may face criminal prosecution.
- Voluntary Disclosure vs. Formal Investigation:
- COP 8: COP 8 investigations are conducted on the basis of HMRC’s suspicion and are not initiated through a voluntary disclosure process by the taxpayer.
- COP 9: COP 9 is explicitly designed to encourage voluntary disclosure by providing taxpayers with an opportunity to come forward on their terms and avoid prosecution if they provide a full and accurate disclosure.
It is essential to note that both COP 8 and COP 9 investigations have serious implications for taxpayers, and seeking professional advice from a tax specialist or legal expert is crucial when facing either of these investigations.
In conclusion, the disparities between COP8 and COP9 tax investigations conducted by HMRC highlight the distinct approaches employed when tackling suspected tax irregularities. COP9 investigations primarily target cases where fraud is suspected, offering taxpayers the opportunity to make a full disclosure under the contractual disclosure facility and potentially receive immunity from prosecution.
On the other hand, COP8 investigations focus on potential tax irregularities that may not initially involve allegations of fraud. While COP8 investigations lack a standardized format, they can be converted to COP9 or criminal investigations if evidence of fraud emerges during the process.
Both types of investigations can be intrusive and extensive, involving intensive questioning and scrutiny of the taxpayer’s personal and business affairs. Understanding these differences is crucial for taxpayers to navigate the HMRC investigation process effectively and ensure compliance with tax regulations.
David is a Solicitor and Chartered Tax Advisor. David has many years experience of advising clients on Regulatory Fraud matters, involving the smallest to the very biggest cases.
He regularly lectures to the City of London Police on these and related issues. He regularly advises on Confiscation and other consequences that flow from money laundering offences