Tax Avoidance Investigations
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If HMRC suspects a "serious" loss of tax but not due to tax fraud, they will initiate the investigation under Code of Practice 8 (COP8). These inquiries typically focus on taxpayers who have engaged in tax planning structures or tax avoidance schemes and are conducted by HMRC’s Fraud Investigation Service teams.
Description
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Tax planning structures and avoidance schemes are utilized by taxpayers to minimize their tax liability within what they perceive to be legal boundaries, often exploiting loopholes or offshore arrangements.
In cases where a tax avoidance scheme has been widely marketed, HMRC may conduct detailed investigations into a sample of taxpayers involved and apply the findings to all participants in the scheme.
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HMRC Approaches in Code of Practice 8 Cases
HMRC employs two approaches in tax investigations related to planning structures and avoidance schemes under Code of Practice 8.
One approach involves challenging the interpretation of tax legislation on which the success of the scheme relies. This entails detailed technical arguments on the correct interpretation of tax laws, which may be arbitrated by an independent Tax Tribunal if parties cannot reach a consensus.
Alternatively, HMRC may challenge the implementation of the tax planning itself. Many schemes involve multiple steps that must be executed precisely for the planning to be effective. HMRC scrutinizes each step to ensure correct implementation and may exploit any deviations from the intended procedure to undermine the planning.
In most cases under Code of Practice 8, HMRC challenges the tax planning on both grounds simultaneously.
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How We Can Help
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Advisers who promote tax planning schemes may lack objectivity when defending against HMRC investigations into their own planning. Therefore, consulting an independent tax investigations specialist is crucial. We evaluate the planning in place and provide an honest assessment of its viability. If we believe the planning is effective, we vigorously defend it.
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We have successfully defended numerous clients against tax investigations into planning and avoidance schemes by swiftly grasping the technical issues and presenting robust arguments in defense of our clients.
If you are under investigation under Code of Practice 8, contact us for a free, confidential, and no-obligation discussion. We are happy to offer an initial meeting free of charge to prospective clients.