What is Code of Practice 8?
Where HM Revenue & Customs (HMRC) believe that a taxpayer has deliberately tried to pay less than the correct amount due or has taken advantage of a tax avoidance scheme, they will make a challenge.
If HMRC do not consider that fraud has taken place, Code of Practice 8 is normally issued by Specialist Investigations. Some taxpayers may view this as a fishing exercise by HMRC, but you are well advised to take such matters seriously.
Where Code of Practice 8 has been issued by another department of HMRC, it is because the matter is being coordinated and directed overall by Specialist Investigations.
What is HMRC looking for?
HMRC will write to any taxpayer enclosing the booklet entitled Code of Practice 8 telling them that they are under investigation. However, HMRC are not obliged to tell a taxpayer why they are under investigation.
Code of Practice 8 is a fact-finding approach and documents such as previously submitted tax returns will be reviewed as part of the investigation. The issues being investigated under may span a number of years but may or may not necessarily cover all the entries on a Tax Return.
What happens next?
This depends on what HMRC find (or don’t find, as the case may be):
- If there is no evidence of fraud and no additional tax is due, HMRC will simply conclude their investigation.
- If any amount of tax is due, a Settlement will be sought for the all the tax, interest and potentially penalties for all years.
- If fraud is discovered, Code of Practice 8 will be withdrawn and replaced by Code of Practice 9.
If you wish to discuss this or any other matter with a member of the team, please contact us.