Husband and wife David and Charlotte* were at a loss as to why HMRC Fraud Investigations Service (FIS) had issued Code of Practice 9 (COP9) accusing them of committing serious fraud. Here’s how we helped.

Exploring why they were under investigation

David and Charlotte sought help from our specialist Tax Investigations & Dispute Resolution team as they were confused as to why they had received a letter from HMRC and wanted advice on how best to resolve matters. We established that Charlotte had received two gifts from her father - £580K in February 2009 and £575K in April 2016. Given her father was UK non-domiciled we suspected the source of these gifts may have originated from overseas, meaning any tax exposure could be considered offshore non-compliant and caught by the Requirement to Correct (RTC) provisions.

The couple had both taken advice regarding the first gift which confirmed there were no UK tax implications but had not sought advice for the second gift, assuming the same situation applied. Given this, we believed their behaviour was, at worst, careless and advised them to reject the COP9 offer as behaviour must be deliberate to accept. This went against other advice they had received elsewhere.

Compiling our report

David and Charlotte followed our advice and rejected the COP9 letter while we advised HMRC FIS the couple would be fully engaging in the COP9 process.

Our work established the second gift came from a Panamanian trust and was exposed to Transfer of Assets Abroad (TOAA) legislation. We advised HMRC FIS of the gifts and outlined potential exposure within the customary 60-day period to accept/reject. We collated all necessary evidence and delivered a report that confirmed the first gift was non-taxable and the second gift was taxable by virtue of TOAA legislation, all supported by witness statements from the clients and the trustee, accountant and solicitor that dealt with the trust. The report, which drew on expertise from our Tax Investigations & Dispute Resolution team, our Private Client Trust team, and Laurent Sykes QC, concluded that David and Charlotte’s position was non-deliberate.

All penalties suspended

Despite an almost two-year investigation, HMRC FIS accepted the report in its entirety without challenge and agreed Failure to Correct (FTC) penalties of up to 200% would not apply given our outline within the initial 60-day period. HMRC FIS accepted David and Charlotte hadn’t deliberately evaded tax and agreed to the suspension of all penalties.

Our support of David and Charlotte is not atypical of our tax investigation clients. Through careful listening and probing we were able to identify the potential issues and exposure. Throughout the two-year process we gave them emotional support too, particularly as Charlotte lost her father at the outset of the investigation. The partnerships we have with other experts also helped to achieve the best-case position for our clients.

“We couldn’t have been represented by more dedicated professionals. Moreover, professionals with humanity and compassion. You really took care of us and guided us through some very dark times – and made us laugh! And for that we will always be grateful.” Client

*Clients names changed to protect their confidentiality