HMRC Tax Evasion Investigations: Legal Advice and COP9
Michael Paulin, tax and public law barrister at 1 Crown Office Row, London. Michael.paulin@1cor.com
If HMRC suspects tax evasion, early specialist legal advice can help you understand the allegation, assess the evidence and decide how to respond. An investigation does not establish that you have committed an offence. Errors, disputed tax treatment and deliberate concealment require different analysis.
I advise individuals, entrepreneurs and businesses facing serious HMRC disputes. My experience includes complex COP9 investigations involving cross-border issues connected with the UK, United States, Dubai, Cyprus and India.
What is the difference between tax evasion and tax avoidance?
In HMRC v Pendragon plc [2015] UKSC 37 Lord Sumption at [5] held that:
“It is traditional, at any rate in this jurisdiction, to distinguish between avoidance, which involves the lawful arrangement of a taxpayer’s affairs so as to minimise his tax bill, and evasion, which is an unlawful failure to account for tax due, generally by suppressing or falsifying information”.
An unsuccessful tax avoidance arrangement does not, by itself, establish tax evasion. The relevant conduct, knowledge and intention must be examined against the particular allegation. Equally, describing an arrangement as tax avoidance does not establish that its intended tax treatment is legally effective.
What should you do if HMRC suspects tax evasion?
First establish which procedure HMRC is using, what it alleges and any response deadline. Before providing a substantive explanation or attending an interview, obtain advice on your position and the appropriate response.
Preserve relevant tax returns, bank statements, invoices, emails, accounting records and correspondence with advisers. Do not delete, alter or backdate documents.
Avoid speculation: distinguish what the records establish from recollection or assumption. Paying disputed tax does not automatically end an investigation. Disclosure, cooperation and payment may be relevant, but their consequences depend on the procedure and circumstances.
Is a COP9 investigation a criminal investigation?
COP9 is a civil procedure used by HMRC in selected cases where it suspects tax fraud. It offers the Contractual Disclosure Facility, or CDF, as an alternative to criminal investigation.
Under the CDF, the individual undertakes to disclose deliberate behaviour and other tax irregularities fully and accurately. HMRC’s undertaking against criminal investigation is subject to the contractual terms. Incomplete disclosure, or materially false statements or documents supplied during the process, can put that protection at risk.
Accepting a CDF offer involves admitting deliberate behaviour. It should therefore follow careful consideration of the evidence and the terms. Advice is equally important where you dispute HMRC’s suspicion.
How can HMRC’s allegations be challenged?
A proper assessment tests HMRC’s case against the documents and the applicable law. Relevant issues may include:
Knowledge and intention: whether an inaccuracy was deliberate or arose from a genuine error.
Reliance on professional advisers: what information you supplied, what advice you received and whether your reliance was reasonable.
Disputed tax treatment: whether the issue concerns the legal treatment of income, expenditure, residence or a transaction.
Evidential weaknesses: whether HMRC has misunderstood records, relied on incomplete material or calculated liability incorrectly.
Reliance on an accountant is not an automatic defence. Nor does every incorrect return establish dishonesty. The full factual context matters.
Where liability is established, advice may also address disclosure, penalties and settlement. Those questions should be considered separately from whether HMRC’s original allegation is justified. There is typically a 60 day window in order to accept or reject a CDF offer, and so prompt action is necessary.
My experience in complex COP9 investigations
I have handled difficult COP9 matters involving multiple jurisdictions and represented entrepreneurs ranging from founders of growing businesses to individuals with substantial private wealth.
My approach is forensic and commercially focused: scrutinise HMRC’s evidence, identify the strongest available arguments, assess risks candidly and pursue a workable resolution. Cross-border cases may require coordination with accountants and advisers overseas to establish a coherent factual and legal position.
A recent matter concerned an international payroll business, an umbrella company and an associated recruitment agency. Following financial difficulties during the Covid pandemic, a form relating to the closure of a company was completed inaccurately concerning outstanding VAT liabilities. I represented the clients at several meetings with HMRC at Chambers, examining the records and explaining the circumstances. We challenged the suggestion that the inaccuracy demonstrated tax fraud or deliberate evasion by the directors. The matter was successfully settled, enabling the clients to bring a difficult and prolonged dispute to a close.
Instructing a tax barrister
I accept Direct Access instructions where appropriate and am authorised to conduct litigation. I review HMRC’s allegations, advise on accepting or rejecting the CDF, prepare representations and attend HMRC meetings. I also advise on particularly sensitive tax investigations, including matters involving media interest or issues arising alongside high-value divorce litigation. The scope of advice and fees are agreed before work begins.
If you have received a COP9 letter or face allegations of tax evasion, email michael.paulin@1cor.com for a confidential initial discussion. Include a brief outline of the matter and any response deadline.