Code of Practice 8: What you need to know about COP8

The UK's HM Revenue and Customs (HMRC) utilises various methods to ensure proper tax compliance. A Code of Practice 8 (COP8) investigation is typically used when HMRC suspects individuals or entities (e.g. companies / trusts or partnerships) have underpaid taxes through complex tax avoidance arrangements or structures.

Unlike routine compliance checks, COP8 investigations fall under the remit of HMRC's Fraud Investigation Service (FIS), a specialised compliance team equipped to handle complex tax matters.

COP8 investigations typically target:

• Individuals or businesses suspected of using elaborate tax avoidance schemes
• Offshore transactions linked with high-risk tax jurisdictions
• Situations where significant tax losses are suspected.

 

HMRC can begin a COP8 investigation based on various triggers, including:

• Information received from external sources, including banks and other tax authorities
• Inconsistencies or discrepancies identified in your tax filings
• Intelligence gathered by FIS through investigations or internal referrals.

 

COP8 investigations differ from those conducted under Code of Practice 9 (COP9). COP9 deals with individuals suspected deliberate inaccuracies in records or undisclosed income/gains and offers them criminal immunity in exchange for a full disclosure. COP8 focuses on attempts to avoid or underpay taxes through more sophisticated methods.
 

What does a COP8 investigation involve?

COP8 investigations usually involve significant potential tax liabilities. HMRC will notify you that they are opening a COP8 enquiry through a formal letter, which will outline the scope of the investigation and the information and documentation HMRC requires. The process can often be very wide-ranging, with HMRC utilising its extensive information powers to bring your financial records, tax returns, and correspondence related to the tax arrangements under scrutiny.
 

Penalties under COP8 investigations

If errors are found during the investigation, HMRC will charge statutory interest in addition to any additional tax liabilities arising. HMRC will also seek to charge penalties, which can be up to 200% of the tax due. If penalties are charged, these can be mitigated by proving accurate information promptly and cooperating fully with HMRC.
 

Get expert support

It is essential to seek professional advice from qualified tax specialists during this process, as COP8 investigations can be complex and have significant financial, legal and reputational implications. Public knowledge of tax avoidance can harm a business’s reputation and trust with customers and partners. You may also face increased scrutiny in future tax filings as HMRC may monitor your tax affairs more closely to ensure compliance.

If you receive a COP8 notice from HMRC, it is advisable to act promptly and engage a tax advisor to navigate the situation effectively and ensure your rights are protected throughout the investigation.