HMRC fraud investigations to have netted more than £610m since 2016

A new research led by the UK accountancy firm Saffery Champness revealed that COP8 and COP9 investigations led by HMRC have yielded a total exceeding £610 million in the financial years 2016/17 to 2018/19- a colossal amount for the Treasury.

The results obtained through a Freedom of Information Report (FOI) disclosed that COP8 investigations generated £262,228,346 (43%) and COP9 investigations £348,064,622 (57%) in the period analysed.

COP9 (Code of Practice 9) cases involve criminal investigations launched when HMRC suspects fraud has occurred whilst COP8 cases are civil inquiries initiated when there has been a deliberate, yet not criminal, avoidance of tax or when an individual has used a scheme to do so.

In the period 2016/17 to 2018/19:

• 1,473 COP9 and 924 COP8 investigations were opened
• 610 COP9 and 260 COP8 inquiries were closed resulting in a penalty charge
• The amount of COP9 investigations opened reduced from 549 to 438
• Cases closed with a penalty as a proportion of cases opened increased

In the first quarter of 2019, HMRC opened 83 COP9 and 46 COP8 inquiries which yielded more than £20 million.

According to the 2018/19 accounts, the Revenue generated £34.1bn in additional tax through an attempt to tackle tax avoidance, evasion and non-compliance.

HMRC more empowered than ever

Zena Hanks, partner at Saffery Champness, commented: “We have seen HMRC take an increasingly hard line on suspected avoidance in recent years. The kinds of avoidance schemes that many people imagine have long been consigned to the history books are still under HMRC scrutiny – we have never recommended them and taxpayers don’t want to use them. The vast majority of taxpayers just want to get things right.

“However, HMRC’s pool of intelligence is growing as are the legal tools at its disposal – with the Connect System and the Common Reporting Standard the Taxman knows far more than ever before. HMRC therefore feels ever more empowered to target taxpayers where they think fraud may have been committed.

She added: “HMRC will also be learning as they go, gathering more information and testing new powers through the courts – as we have seen recently with the IR35 cases – and will continue to strengthen their resources for tackling tax evasion. Individuals who are concerned they might not be compliant should seek advice and potentially take advantage of disclosure facilities provided by HMRC. The quicker mistakes are corrected the better the opportunity to resolve the mistake and minimise the penalties that HMRC can levy.

“We should also be mindful that HMRC do not always join the dots correctly and enquiries can be opened with incorrect information. In these circumstances swift action should be taken to close down any such enquiry and to protect the taxpayer from unnecessary angst.”