Code of Practice 8 (COP8): What Is It & How to Respond?

If you've received a Code of Practice 8 form from HMRC, don't panic. In today's article we'll tell you everything you need to know.

Getting a Code of Practice 8 form out of the blue can be a concerning experience. The wording from the HMRC document is unsettling: "HM Revenue and Customs Fraud Investigation Service – Code of Practice 8".

But don't panic. A COP8 is just the first step when HMRC suspects that the right amount of tax hasn't been paid. With the right expert advice, most cases can be cleared up without any long lasting problems.

What Is A COP8

Don't confuse COP8 with the more serious Code Of Practice 9. A COP9 form is issued when HMRC "suspects tax fraud". It's often sent as a follow up when HMRC discovers problems during the COP8 process.

A COP8 is for less serious situations:

Most customers pay what is due but some deliberately try to pay less than the correct amount or take advantage of a scheme or device to reduce a tax liability. If we suspect this, we will investigate under Code of Practice 8 to establish the facts to recover any tax, interest and penalties due.

We will not undertake this investigation with a view to a criminal prosecution but we may take a different approach if we suspect or find evidence of fraud at any time during our investigation.

What To Do Straight Away

It's important to note that sending a COP8 doesn't grant HMRC any special powers in itself. It's up to you to decide how far you want to cooperate with them.

We recommend contacting a tax advisor straight away to decide the best course of action. HMRC makes it clear that this is well within your rights:

You must decide whether to co-operate with our investigation. To make a decision you may want to get help from a professional adviser.

If you appoint an advisor, they can represent you to HMRC:

You may want to consider appointing a professional adviser to represent you during our investigation. This is a matter for you to decide. Your adviser can be with you at all meetings with us. They may also correspond with us on your behalf. We make notes of all meetings and you or your adviser can ask for copies at any time.

How It Works

The full HMRC document has all the information. Here are some of the key takeaways:

• You can decide whether or not to co-operate with the HMRC investigation
• If you do co-operate, you may be asked to attend a meeting at your office, at your accountant's or at an HMRC office
• Make sure your paperwork is up to date as you will have to provide HMRC with plenty of information
• It is an extremely serious offence to make deliberate false statements to HMRC

At the end of the investigation, if you've done nothing wrong the FIS will let you know. If they determine that you have underpaid your taxes, you will have to settle the amount (plus interest and penalties).

If they determine you have made errors or omissions, they will also make you sign something called a "Certificate Of Full Disclosure". At this stage you can appeal to an independent tax tribunal if you don't agree with the outcome.

How We Help

If you decide to work with us, we start by performing a full review of your financial and tax situation. We then decide what, if anything, to provide to HMRC.

We generally recommend trying to come to a settlement with HMRC at this stage. If you ignore the problem, you can often end up with bigger bills down the road. HMRC could even decide to escalate to COP9 status, which opens you up to the possibility of a criminal investigation.

If you've received a COP8, please get in touch. One of our tax experts can start working with you straight away to determine the best course of action.