Physician, Heal Thyself – Tax Investigation under COP8

Posted: 19th January 2024

Client Background

The managing partner of a chartered accountancy practice approached us with a critical tax issue. He had failed to submit his self-assessment returns for seven consecutive years. As a managing partner, he was concerned about potential serious repercussions. This was especially concerning, considering his status as a “special category person.” His primary fears included:

• investigations under Code of Practice 9 (COP9),
• the risk of losing his practising certificate upon reporting the matter to his regulatory body,
• and potential damage to his professional reputation.

We immediately thought there might be another approach, using COP8.

The issue for the client

The client’s primary concerns were the potential implications of being investigated under COP9. This included:

• the obligation to report the matter to the regulatory body,
• the risk of losing his practising certificate, and
• the possibility of HMRC publishing his details,

This would have led to irreversible damage to his professional reputation.

Resolution approach

Upon understanding the client’s situation, we delved into the circumstances that led to the failure to submit tax returns for seven years. A combination of unfortunate life events and episodes of poor mental health emerged as contributing factors. Recognising the significance of these mitigating factors, we approached HMRC with a voluntary disclosure on behalf of the client.

The outcome of the process

We persuaded HMRC to investigate the matter under Code of Practice 8 (COP8) rather than COP9. We did this by strategically emphasising the mitigating factors during our submission. This strategic decision had several positive outcomes:

1. No Admission of Deliberate Behavior. The client was not required to admit deliberate behaviour or fraud. This preserved his legal standing and mitigated potential criminal implications.
2. Lower Level of Penalty. Investigating COP8 resulted in a lower level of penalty for the client. This reduction in financial liability was attributed to the strong presentation of mitigating factors.
3. No Disclosure to Regulatory Authority. The client was not obligated to report the matter to his regulatory authority. This mitigated the risk of losing his practising certificate. It also protected his professional standing.
4. Non-Publication of Details by HMRC. HMRC did not publish the client’s details. This safeguarded his professional reputation and prevented potential terminal damage to his business.

Conclusion

This case illustrates the importance of a strategic and empathetic approach to resolving tax issues. It considers mitigating factors and leverages voluntary disclosure to navigate complex regulatory landscapes. We successfully steered the investigation away from potentially severe consequences. We did this by focusing on presenting a compelling narrative, emphasising mitigating circumstances. This preserved the client’s professional standing and mitigated financial and reputational risks. Get in touch to find out more about our services.