Code of Practice 8 investigations can be slightly confusing. HMRC’s fraud investigation team act under this code, but oftentimes their investigations do not relate to criminal accusations of fraud. Instead, an investigation under Code of Practice 8 will often by instigated by an individual exploiting any loopholes that allow for tax avoidance, such as the use of a number of complex offshore accountancy practices and umbrella companies.
The primary intention of Code of Practice 8 investigations is a recovery attempt tax that may be owed, but if concerning inaccuracies or inconsistencies are found they could lead to criminal prosecution. As a result, any instigation of a Code of Practice 8 investigation should be referred to a professional as soon as possible. Always remember, HMRC are not concerned with what you do or do not know, or what your intention was. Any kind of inaccurate reporting will be considered to be a deliberate and wilful attempt to defraud the government.
Code of Practice 8 investigations are usually brought against a company that primarily operated from the UK but has divisions all over the world, and is attempting to report and pay all tax through a lower-cost destination. Technically this is legal (hence tax avoidance, as opposed to tax evasion), but any kind of inconsistency can lead to prosecution and a recovery of any assets of finances owed to HMRC.
Alternatively, an individual could be investigated under Code of Practice 8 if they are officially a resident of the UK, but due to business travel commitments have registered as a tax resident in another territory. Again, this is not formally an illegal practice – but if an investigation under Code of Practice 8 is announced, the individual in question will need to provide many years of travel documentation, bank statements, credit card bills and various other documentations. This can be a worrying and time-consuming process, which is another reason why it is highly advisable to seek professional assistance – preferably prior to facing investigation.