HMRC fraud investigations netted more than £600m since 2016

14 Oct 2019

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HM Revenue & Customs’ (HMRC’s) COP8 and COP9 investigations yielded a total of £610 million for the Treasury in the financial years 2016-17 to 2018-19, according to research by Saffery Champness.

The data, which was obtained by Saffery Champness through a Freedom of Information Request (FOI), showed that COP8 investigations yielded £262 million (43%) and COP9 investigations yielded £348 million (57%) in the period analysed.

COP9 (Code of Practice 9) cases are criminal investigations launched in situations where HMRC suspects serious fraud has taken place. COP8 cases are civil investigations launched when HMRC believe there has been deliberate, but not criminal, avoidance of tax or where an individual has used a scheme to avoid or reduce tax liabilities.

Data from the FOI request submitted by Saffery Champness shows that 1,473 COP9 and 924 COP8 investigations were opened in the period 2016-17 to 2018-19.

In the same period, 610 COP9 and 260 COP8 investigations were closed, resulting in a penalty charge. While there is no precise correlation between cases opened and closed – given that investigations can take longer than a year and penalties can follow at a later date – the aggregate figures show that as a proportion of total cases opened, 28% of COP8 investigations and 41% of COP investigations were closed with a penalty.

The number of COP9 investigations opened has reduced year-on-year since 2016-17 (dropping from 549 to 438) but the cases closed with a penalty as a proportion of cases opened has increased year-on-year (from 33% to 53%). So far this year (Q1 2019), HMRC has opened 83 COP9 and 46 COP8 investigations, and generated more than £20 million in yield.

Zena Hanks, a partner in the private wealth team 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 tax man knows far more than ever before. HMRC therefore feels ever more empowered to target taxpayers where they think fraud may have been committed.

“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.”

According to its 2018-19 accounts, HMRC generated £34.1 billion in additional tax through efforts to tackle avoidance, evasion and non-compliance.