November 28, 2021

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Civil investigations by HMRC fell during lockdown

Civil investigations by HMRC fell during lockdown
HMRC civil investigations into suspected tax evasion have fallen during the pandemic compared to pre-pandemic levels, according to FOI data obtained by national accountancy group UHY Hacker Young. The organisation said HMRC opened 278 civil investigations into suspected tax evasion during the first ten months of the pandemic, between 1 April 2020 to 31 January…

HMRC civil investigations into suspected tax evasion have fallen during the pandemic compared to pre-pandemic levels, according to FOI data obtained by national accountancy group UHY Hacker Young.

The organisation said HMRC opened 278 civil investigations into suspected tax evasion during the first ten months of the pandemic, between 1 April 2020 to 31 January 2021.

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These investigations, known as Code of Practice 9 enquiries (Cop9) look into taxpayers who are suspected of committing serious tax fraud, which includes deliberately paying less tax than is due, over claiming tax reliefs or mis-claiming government grants.

HMRC may seek to use Cop9 as a tool to encourage more suspected furlough fraudsters to come clean, UHY Hacker Young said.

But a separate FOI request showed that the number of Cop9 investigations opened in previous years was significantly higher.

HMRC said the figures for the pandemic are “incomplete” as they only apply to the first ten months of the year, unlike pre-pandemic numbers which are for 12 complete months.

Number of Cop9 investigations opened:

2016/17: 549

2017/18: 486

2018/19: 438

2019/20: 425

Although the figures are not directly comparable, as the pre-pandemic statistics are for full years, while the latest pandemic figures account for a ten-month period, the difference is still stark.

On an average monthly basis, the number of civil investigations opened by HMRC during the pandemic fell to around 27 per month compared with 35 per month for 2019/20.

A HMRC spokesperson responded and said: “The figures for 2020/21 only apply to the first ten months of the year, so are incomplete.”

“The number of COP9 cases commenced each year changes from year-to-year, because the number of cases identified as suitable for COP9 changes from year-to-year.”

“Since the start of the pandemic,” the spokesperson added, “HMRC has worked consistently to support businesses during what we know has been a uniquely challenging time for them, while continuing to tackle tax fraud and avoidance to maintain a level playing field.”

Cop9 Investigations

Financial penalties for Cop9 investigations can reach up to 200 per cent of the tax HMRC believes it is owed.

Taxpayers who have civil investigations into their affairs opened, are offered immunity from criminal prosecution by HMRC if they agree to fully co-operate with the investigation.

They could also the threat of a prison sentence by voluntarily entering into a Cop9 agreement with HMRC.

Sheila Berry, partner at UHY Hacker Young, said: “HMRC’s offer of a Cop9 deal doesn’t last forever, so tax evaders who receive an offer shouldn’t ignore it. If they do spurn the approach from HMRC then they could find themselves facing a full-blown criminal prosecution.”

“HMRC is throwing taxpayers a lifeline by issuing these Cop9 enquiries,” she added.

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