HMRC Investigations: What to Know and What to Avoid

What are the Types of HMRC enquiries?

HMRC conducts several different kinds of enquiries, and the type signals how serious the matter is and how it should be handled:

• Compliance check or information requisition: a focused review of one or more specific items on a return, such as a particular relief or source of income.
• Full enquiry: a comprehensive review of an entire return and the underlying records, typically where HMRC perceives a higher risk.
• Code of Practice 8 (COP8): used where HMRC suspects a significant amount of tax has been avoided, often involving complex, offshore or high-value arrangements. It is conducted by HMRC’s Fraud Investigation Service but on a civil (non-fraud) basis.
• Code of Practice 9 (COP9): used where HMRC suspects deliberate, fraudulent conduct. It offers the Contractual Disclosure Facility, the opportunity to make a complete disclosure in exchange for HMRC not pursuing a criminal investigation, and is among the most serious civil routes a taxpayer can face.

For high-net-worth and complex affairs, COP8 and COP9 are the enquiries that carry the greatest risk. HMRC opened 212 new COP8 cases and 268 new COP9 investigations in 2023 to 2024, and the average amount of tax under consideration per fraud case rose to around £2.2 million, reflecting a focus on higher-value cases.

What Is Driving HMRC Enquiries?

The starting point is simple: HMRC now has more data and more time to use it. Interventions are rarely random. They are typically triggered by risk profiling based on information received through international exchange regimes (including the Common Reporting Standard (CRS), financial institution notices under Sch 36 Finance Act 2008, and HMRC’s evolving analytical capabilities). The direction of travel suggests increasing use of automated or AI-assisted review processes, raising questions about how consistently raw data will be interpreted at the outset.

Certain areas remain perennial points of focus:

• Residence and day-counting under the SRT: Errors in applying the Statutory Residence Test, particularly the “only home” test and the full-time work overseas (FTWO) conditions, are common triggers. Day-counting must be precise, and prior-year positions are frequently revisited to test access to favourable regimes or exposure to longer-term rules (including the temporary non-residence rules in s.809L–809R ITA 2007).
• Offshore regimes and disclosures: The new four-year Foreign Income and Gains (FIG) regime (introduced from April 2025 as part of the abolition of the remittance basis) brings both opportunity and risk. Claims are made through the return and create a contemporaneous evidential record. In practice, these records are likely to be scrutinised when individuals exit the regime, creating “cliff-edge” enquiry risk if planning has not considered the post-FIG position from the outset.
• Complex reliefs and claims: Claims involving offshore income and gains, particularly those that depend on ordering rules, tracing, or reconciliation across multiple accounts, are increasingly scrutinised. HMRC expects supporting analysis beyond the face of the return, especially where computations present a “black box” to the reviewing officer, such as with claims for relief under the Temporary Repatriation Facility (TRF).
• Treaty claims, remittance basis and domicile: Double tax treaty positions, credit claims and remittance basis planning remain sensitive areas. The Supreme Court’s decision in HMRC v Oyster Marine Ltd [2021] UKSC 43 (and subsequent treaty cases) reinforces that treaty claims turn on careful legal analysis, but success often depends on evidential clarity. In the context of domicile and remittances, HMRC continues to adopt entrenched positions, as reflected in cases such as Oppenheimer v HMRC [2023] EWCA Civ 1277, where issues of credit relief and offshore structuring were closely examined.
• Trusts and anti-avoidance regimes: The Transfer of assets abroad (ToAA) regime continues to feature prominently in HMRC challenges, often alongside permanent establishment or wider structural risks. At the same time, HMRC is increasingly focused on identifying the “economic settlor” and testing trust integrity through tainting rules and funding arrangements.
• LLP and partnership structures: Following the landmark decision in HMRC v The Boston Consulting Group UK LLP and others [2026] UKUT 00025 (TCC), HMRC is expected to pursue mixed membership rules under Part 9 ITA 2007 (ss.850C–850E) more assertively. The Upper Tribunal’s approach, particularly to Condition X, Condition Y and the “reasonable to suppose” test, highlights that these enquiries will be highly fact-sensitive and turn heavily on contemporaneous evidence of commercial purpose.

How Is HMRC’s Approach to High-Net-Worth Individuals Changing?

HMRC’s High-Risk Wealth Programme reflects a shift towards a more coordinated and persistent compliance model. Borrowing from the Large Business framework, HMRC now adopts a “customer compliance manager” approach, with ongoing engagement and periodic risk reviews rather than one-off enquiries.

In practice, this means:

• Broader, multi-issue enquiries rather than single-point challenges
• Deep-dive information requests into entire structures
• Greater scrutiny of advisers and the advice provided (including under PCRT and HMRC’s “Standard for Agents”)
• Increased reliance on behavioural arguments where technical disputes arise

Overlaying this is the expansion of uncertain tax treatment rules (Finance Act 2022, Sch 15), which in some cases require proactive notification where positions diverge from HMRC’s known interpretation and exceed financial thresholds.

How Can You Protect Your Position?

Against this backdrop, a reactive approach is no longer sufficient. The most effective strategy is to anticipate how arrangements will appear to HMRC, with full data visibility, years into the future.

• Invest in contemporaneous evidence. Many disputes now turn less on pure legal analysis and more on evidence: why a structure was implemented, what commercial drivers existed, and how decisions were made at the time. This is particularly important where motive defences are in play (for example under the ToAA “motive defence”, as interpreted in cases such as Fisher v HMRC [2023] UKSC 44).
• Treat record-keeping as part of the planning process. Complex claims should be supported by structured documentation from the outset, segregated accounts, tracing schedules and reconciliations that can withstand forensic review.
• Use disclosures strategically. “White space” disclosures can be valuable, but need to be considered carefully. The scope of protection against discovery assessments under s.29 TMA 1970 remains narrow, as illustrated by recent First-tier Tribunal cases such as Madsen v HMRC [2024] UKFTT and King v HMRC [2024] UKFTT, which emphasise the importance of clarity and completeness.
• Manage information requests carefully. HMRC’s powers under Schedule 36 FA 2008 are wide, but not unlimited. Taxpayers should assess whether information is “reasonably required” and consider legal professional privilege early, before documents are disclosed.
• Stress-test positions before HMRC does. Advisers should increasingly apply an “HMRC lens”: if the full dataset were available in 5 to 10 years’ time, would the position hold? Where uncertainty exists, early engagement may reduce future risk.

What Should You Avoid?

• Treating compliance as a year-end exercise rather than an ongoing process
• Assuming HMRC will not revisit historic positions (particularly given the 12-year offshore time limit)
• Relying on technical arguments without robust contemporaneous supporting evidence
• Overlooking operational aspects (record-keeping, tracing, timing mismatches)
• Taking comfort from the absence of an initial enquiry

Final Thoughts

The consistent theme is clear: HMRC now combines extensive data access with extended time limits, an AI-driven ability to process large amounts of information with limited staffing and a more forensic, litigation-ready approach. For taxpayers with complex affairs, the emphasis must shift from reactive defence to proactive structuring, documentation and disclosure.