Tax Disputes & Resolutions quarterly round up: July-September 2023

HMRC’s latest nudge letter campaigns

HMRC continues to widen its use of nudge letters. As the number of sources providing detailed financial information to HMRC increases, campaigns are becoming more specific and refined. The latest campaigns concern:

  • Non-UK resident corporate landlords owning non-residential property in the UK.
  • VAT errors arising from energy companies potentially not applying the correct legislation.
  • Research and Development claims in the Nursing and Care Home sectors.
  • Gift holdover relief claims made in 2021/22 tax returns.

You can read more about these letters here.

HMRC update – an insight into HMRC’s current priorities and strategies

Recently, HMRC has significantly increased its compliance activity to replenish the coffers following difficult times during the pandemic. Here, we provide our insight into the key areas that HMRC is targeting and their methods of doing so. Read more here.

HMRC’s interest in crypto investors

Many are unaware that crypto investments carry tax implications and can therefore be caught unaware by a ‘nudge letter’ from HMRC. The letter is sent to those taxpayers who HMRC believes need to review their tax affairs and respond accordingly. HMRC is able to send these letters based on information it holds, such as information on UK users from crypto exchanges. Read more here.

Capital Gains Tax (CGT) and divorcing couples podcast

Danielle Ford, Partner and Head of Tax Disputes & Resolutions, and Kay Mind, Private Client Director, featured on a family law podcast, discussing the implications of CGT for divorcing couples. Overall, the changes overall could be advantageous for both separating spouses/civil partners, and helps couples to plan the division of assets more effectively, during what is an emotionally challenging time. Listen here.

HMRC continues its focus on the football industry

Danielle Ford and Riocard Hoye, Senior Manager, contributed to HMRC’s Tax Investigations Enquiries and Powers magazine, discussing HMRC’s continued focus on the football industry and its use of Code of Practice (COP) 9 investigations. With transfer fees spiralling, the impact of any errors will be even more greatly magnified and we expect HMRC to continue to make challenges in this space. Read our recent update on this here.

Increased interest rates

From 22 August 2023, HMRC increased interest rates on late payments to 7.75%, with repayment supplements increased to 4.25%. This represents a rise of 0.25% for both late payments and repayments. HMRC says that the difference between rates compares favourably with commercial practice by other tax authorities globally.

Promoters could be criminalised

Tax avoidance promoters could be criminalised. The Government has issued draft legislation for consultation, prior to its intended inclusion in the Finance Bill 2023/24. It will mean promoters of tax avoidance schemes, who ignore HMRC stop notices, would face criminal charges and a potential two-year prison sentence. HMRC will also be given powers to bring disqualification action against directors of companies involved in promoting tax avoidance and those behind it.

HMRC is moving into the digital age

HMRC’s guidance states that it will accept digital or electronic signatures on 64-8 ‘authorising your agent’ forms. This includes scanned copies of 64-8s with handwritten signatures. Signatures signed on the screen of a digital device or displayed in a keyboard-typed font will be accepted however there are exceptions, including where HMRC has “legitimate reasons” to doubt that the taxpayer provided the signature. If the taxpayer does not place the signature onto the 64-8 form themselves, the form will be invalid.

We hope you enjoyed this edition of the Tax Disputes & Resolutions round up. You can read all of our previous insights here. If you would like further advice on anything mentioned above, or to discuss your circumstances in more detail, contact Danielle Ford, Partner & Head of Tax Disputes or Riocard Hoye, Senior Manager.

HMRC’s latest nudge letter campaigns

HMRC continues to widen the scope of nudge letters. As the number of sources providing detailed financial information to HMRC increases, campaigns are becoming more specific and refined, focusing on smaller groups of taxpayers.

HMRC’s latest nudge letters relate to:

  • Non-resident corporate landlords owning non-residential property in the UK
  • Fuel and power supplies – risk of VAT errors
Non-resident corporate landlords owning non-residential property in the UK

HMRC is issuing nudge letters to non-resident companies that own non-residential property in the UK. The letters are being issued to companies that appear to have failed to notify HMRC for tax purposes. If you have an agent, they will not receive a copy of this letter, as HMRC do not hold a record of the company registering for Corporation Tax or Income Tax. If you receive a nudge letter, we recommend that you share the communication with a professional advisor as soon as the letter is received.

An individual will have 40 days to respond from the date of the letter; it is incredibly important that you respond to HMRC by the deadline to avoid incurring higher penalties.

The letter will be accompanied with a Certificate of Tax Position; there are serious consequences making a false declaration and as there is no de-minimis – caution must be taken. We do not recommend taxpayers completing the certificate, although a response to the letter must still be sent to HMRC before the 40-day deadline nonetheless.

Upon receiving a nudge letter, the action required will be bespoke to each taxpayer. Due to this, we recommend for a professional advisor to review your tax affairs, advise the action required and liaise with HMRC on your behalf.

Fuel and power supplies – risk of VAT errors

Since July 2023, HMRC has been issuing an educational nudge letter to energy companies. The letter requires businesses to check their systems and processes as HMRC has identified some systems that are not applying the legislation correctly.

HMRC has set a deadline of 45 days from the date of their letter to notify them of any errors that have occurred. As before, it is incredibly important that you respond to HMRC by this deadline.

Disclosures and penalties 

If you have discovered an error or omission within your tax returns, disclosing this before HMRC sends a nudge letter or opens an enquiry will lead to a more favourable outcome. This can result in lower penalties, as the disclosure would be considered ‘unprompted’. Alternatively, if you have received a nudge letter, HMRC will deem your disclosure as ‘prompted’, meaning potentially higher penalties.

HMRC has been sending follow-up communications to nudge letters that have not been responded to. HMRC has a database of taxpayers to whom it sends a nudge letter, and a record will be kept noting those who have not acted. If HMRC finds an error, we expect more robust action from HMRC with the possibility of higher penalties.

When to seek advice

If you have received a nudge letter from HMRC, a statutory enquiry notice, or believe you have made an error or omission in your filing to HMRC, we recommend that you immediately seek professional advice. This will help mitigate any penalties that may be due, and an experienced professional advisor can help navigate the disclosure or enquiry process. Additionally, your advisor can assist with related issues, such as agreeing to a payment plan with HMRC for the additional tax liabilities due.

We possess detailed knowledge of HMRC’s powers and processes and can ensure an efficient outcome in all types of enquiries, disputes or tax disclosures with HMRC. To find out how we can help, get in touch with Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.

HMRC’s interest in crypto investors – City AM

Many are unaware that crypto investments carry tax implications and can therefore be caught unawares by a ‘nudge letter’ from HMRC. The letter is sent to those taxpayers who HMRC believes need to review their tax affairs and respond accordingly. HMRC is able to send these letters based on information it holds, such as information on UK users from crypto exchanges.

Important things to note in regards to crypto investments and tax include:

  • Since crypto assets are considered to be investments, any proceeds from a disposal may be subject to Capital Gains Tax (CGT).
  • A disposal for tax purposes also includes the purchase of one crypto asset using another crypto asset. For example buying Ethereum using Bitcoin results in a disposal of Bitcoin.
  • Individuals have a CGT Annual Exempt Amount (AEA) in each tax year, currently £6,000. If an individual’s AEA is exceeded when aggregating capital disposals in a tax year, CGT will apply and penalties and interest charges could arise if this has not been dealt with properly.
  • Nudge letters should not be ignored – seek professional advice straightaway to determine your next steps.

You can read Danielle and Riocard’s article in full on City AM.

Have you received a letter from HMRC?

It is recommended that taxpayers seek professional advice immediately after receiving a nudge letter or a statutory enquiry from HMRC, or discovering a mistake in their filings. If you have any kind of dispute with HMRC, then please contact Danielle Ford or Riocard Hoye.

HMRC update – an insight into HMRC’s current priorities and strategies

Nudge letters

  • Fast becoming one of HMRC’s most common method of communication, this is where a standard communication is sent to many taxpayers who HMRC believes may have a tax issue to disclose, based on specific information they hold.
  • Nudge letters are much more cost effective for HMRC than opening full enquiries, as has traditionally been done. However, we expect HMRC to open enquiries into those who do not respond or make a full disclosure.
  • We are seeing these letters being issued for increasingly specific matters, most recently into Research and Development (R&D) claims and Electronic Sales Suppression (ESS) being used in businesses.
  • Should you receive a nudge letter, please send a copy to your haysmacintyre contact, as we do not always receive copies of all HMRC communications.

Code of Practice 9 (COP9) fraud enquiries

  • COP9 is HMRC’s most serious civil investigation type, where HMRC alleges fraud against a taxpayer. We are seeing an increase in such enquiries being opened, as HMRC focuses its compliance resource on those who have made the biggest mistakes.
  • COP9 provides immunity from prosecution but only for matters which are fully disclosed, so it is crucial to act quickly, make a full disclosure and adhere to the process.

Time to Pay (TTP) arrangements

Due to the ongoing cost of living crisis, many are finding themselves unable to pay tax bills outright and requiring a TTP arrangement. HMRC may agree to this but, in our experience, they are being much tougher in agreeing payment arrangements lasting more than six months, requiring sight of financial information to determine what may be possible.  Approaching HMRC and agreeing a TTP arrangement before a liability becomes due, reduces penalty charges and is favourable in the eyes of HMRC.

Notices of requirement to give security

Applicable to owner-managed businesses, such formal notices can require a business, or its directors, to provide funds as a deposit against current and future tax liabilities. It is usually issued where HMRC has concerns the business may not pay the tax liability and demand significant sums of money from directors personally. We have seen increased use of security notices and have succeeded in assisting clients overturn the demands of these notices by agreeing alternative terms with HMRC.

Settlements and enquiries into investments HMRC now consider to be avoidance schemes

These matters can often run over many years whilst HMRC seeks to defeat schemes in the courts, but with the increases in interest rates recently (HMRC’s late payment rate is currently 6.75%), interest charges can add up over the course of an enquiry. Seeking settlement with HMRC is possible, or even making an advance payment of the tax, where possible, to mitigate overall interest charges.

We are seeing HMRC amendments to earlier years’ tax returns following the conclusion of long-running enquiries.

It is vitally important to seek experienced professional advice and thoroughly check HMRC’s settlement calculations. We are regularly identifying errors in such calculations, usually in HMRC’s favour.

Please also note that payment of an Accelerated Payment Notice (APN) or Partner Payment Notice (PPN) are only advance payments of the tax and do not represent settlement in HMRC’s eyes. Such payments do not conclude open enquiries and interest will be payable from the original tax payment due date, until payment was made to HMRC.

Penalties issued by HMRC, including late filing and late payment

We strongly recommend seeking professional advice in relation to any HMRC penalties issued. There is a defined appeal process in relation to HMRC’s penalty regimes and it may be that penalties could be appealed, mitigated or, in some cases, suspended.

Our Tax Disputes & Resolutions team have a wealth of experience dealing with all HMRC matters. If you would like to discuss any of the above in more detail, or have an HMRC enquiry, dispute or appeal that we may be able to assist with, please get in touch your usual haysmacintyre contact, Danielle Ford, Partner and Head of Tax Disputes & Resolutions or Riocard Hoye, Senior Manager.

Tax avoidance and accelerated payments – faster payments for HMRC

What is a follower notice?

An FN may be issued to a taxpayer who has used an avoidance scheme that has been shown in another person’s litigation to be ineffective.

HMRC may give an FN to a person if certain conditions are met, as below:

  • A tax enquiry is in progress, or an appeal has been made against a closure notice, assessment or determination.
  • A tax return, claim or appeal is made on the basis that a particular tax advantage results from a particular tax arrangement.
  • HMRC believes there is a judicial ruling which is relevant to the particular arrangement.
  • For tax and National Insurance Contributions (NIC), no previous FN has been issued for the same scheme, tax advantage, tax period and judicial ruling.

The FN tells the taxpayer that they may be liable to pay a penalty of up to 50% of the disputed tax or NIC if they do not amend their return or settle the dispute. With an FN, HMRC is effectively pointing to a similar case which has been defeated and is insisting the taxpayer’s will be too.

What is an accelerated payment notice?

An APN is a requirement to pay an amount on account of tax or NIC. The APN gives HMRC powers to receive taxpayers’ unpaid tax before any legal determination is proclaimed. APNs follow the same conditions as FNs and often are preceded by the issue of one.

APNs are received in relation to an ongoing enquiry, dispute or appeal  regarding the taxpayer’s tax affairs.

Both FNs and APNs are tools used by HMRC to retrieve tax in the dispute process, by pushing taxpayers into agreeing with HMRC’s view of the outcome of another taxpayer’s litigation case, involving similar tax arrangements. These notices change the economics of tax litigation in favour of HMRC.

An APN requires full payment of the tax HMRC considers has been lost from the use of avoidance arrangements. They allow the collection of tax before litigation is settled, removing the perceived cash flow advantage for the taxpayer, and addressing the perceived loss to the Exchequer.

If a taxpayer receives an FN and an APN, and decides not to settle their affairs as requested by the FN, the taxpayer will be required to pay the disputed tax or NIC to HMRC, as outlined in the APN.

When a taxpayer is requested to pay an APN, HMRC will hold this payment until the enquiry is complete or the appeal is resolved. The taxpayer will get their money back if HMRC finds the taxpayer does not owe it.

What is a partner payment notice? 

A partner payment notice (PPN) is issued to members of a partnership. In effect, it functions the same as an APN, requiring the partners to rectify any disputed tax upfront, rather than awaiting the outcome of litigation, thus reversing the cashflow advantage in HMRC’s favour.

Payment, penalties and appeal 

When HMRC sends a taxpayer an APN or PPN, payment is due within 90 days. Failure to pay by the due date will lead to late payment penalties or surcharges, and potential enforcement action being taken to recover the tax or NIC.

There is no right of appeal against an APN or PPN in the traditional sense, however the underlying tax and NIC can be appealed and representations can be made. Representations should be made within the payment due date of 90 days and can only be made on the basis of an inaccuracy in the APN or PPN, where for example, the amount quoted is incorrect or the conditions of the notice have not been met.

Payment of an APN or PPN does not equate to settlement

Even though the taxpayer may have paid an APN or PPN, it does not mean they have settled their tax affairs. Any enquiries, appeals or assessments remain open – the amount paid is simply an advance payment of the disputed tax or NIC, and does not cover any late payment interest or penalties which may be included within the final settlement.

The APN will only cover the disputed tax or NIC advantage relating to the specific avoidance scheme covered by the notice.

Any payment received by HMRC will be treated as payment on account towards the final liability and this will stop interest accruing. Payments are held in an HMRC SAFE account and are not visible on the taxpayer’s HMRC online account.

Seek professional help 

If a notice is received, we would advise that you to speak to a professional tax advisor. Following receipt of an FN, APN or PPN, there is a short window where action can be taken, and the penalties for non-compliance can be significant.

haysmacintyre’s Tax Disputes & Resolutions team has expert knowledge of HMRC procedures. To discuss any of the above measures, or for any queries related to disputes with HMRC, contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions.

Online earning platforms

As part of its latest attempts to keep up with the rapid expansion of the digital economy, HMRC is sending nudge letters to online content creators who make money or receive gifts for posting material on platforms such as Instagram, TikTok and YouTube.

Digital platform reporting to tax authorities

From January 2024, the Model Reporting Rules for Digital Platforms means that digital marketplaces, such as Airbnb, eBay, and Vinted, will have to report incomes of individuals earning money via their platforms. The goods and services covered by the reporting requirement include accommodation, transport rental, personal services, and tangible goods. The information on income will be sent to the tax authority where the seller is a resident and platforms will also provide a copy of the reported information to the seller.

The first report is due on 31 January 2025. This is in addition to self-employed individuals submitting their income to the tax office on their Self Assessment tax return. Penalties will be applicable should the digital platform not comply by the due date.

As such, any discrepancies between the Self Assessment tax return and the Model Reporting Rules for Digital Platforms may lead to an enquiry by HMRC, so keeping detailed records of all income received from such platforms is imperative. The gig economy has really grown in the past few years and this is the latest attempt by HMRC to tackle non-compliance.

If you have found an omission in your tax filings, we recommend seeking an experienced tax advisor to prepare a voluntary disclosure to HMRC. Making an unprompted disclosure will mitigate any potential penalty charges. If you need further assistance on the above, or for advice on nudge letter correspondence, contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.


Pandora Papers: HMRC sends ‘nudge letters’ to taxpayers

Two years after the announcement in October 2021 that HMRC were to consider an investigation, HMRC has started issuing letters to some of the taxpayers named, requesting they review their tax affairs. Letters will be sent to hundreds of taxpayers, and they will have 30 days to respond to the letter.

Should updates to their tax affairs be necessary, HMRC is recommending  that taxpayers go to the GOV.UK website and search ‘tell HMRC about underpaid tax from previous years’. There are three disclosure options, two of which are potentially relevant here – the Contract Disclose Facility (CDF) or the Digital Disclosure Service (DDS). Care must be taken, as owing to the nature of HMRC’s enquiries, the DDS may not be the most suitable method of disclosure to HMRC as fraud could be suspected. The alternative method is the Contractual Disclosure Facility (CDF), under Code of Practice 9 (COP9), which offers protection from criminal prosecution for any issues disclosed. There are similarities to the Euro Pacific Bank case, where HMRC encouraged taxpayers with connections to the now liquidated bank to use the Worldwide Disclosure Facility (WDF), although HMRC should have included reference to the CDF.

Disclosures and penalties 

If a taxpayer finds a mistake in their filings to HMRC, disclosing the error or omission before HMRC sends a letter or opens an enquiry will lead to the most favourable outcome. Following receipt of an HMRC letter, a disclosure to HMRC will be treated as ‘prompted’ for penalty purposes. Prompted penalty rates are higher than unprompted penalties rates. For example, an offshore omission can result in the maximum prompted penalty of 200%. In addition, a further penalty of 50% of the tax could be levied for an ‘asset move’; this is where assets have been moved from the UK or other jurisdictions and therefore is considered to be a method to avoid UK tax or to disguise non-compliance with UK tax legislation.

Completely voluntary disclosures to HMRC benefit from the lowest possible penalty range for the type of error. Broadly, the length of time interacting with HMRC will also be significantly shorter in comparison to a full investigation.

A professional tax advisor can guide a taxpayer through the disclosure process and advise, where applicable, the penalty mitigation available. We recommend taxpayers immediately seek professional advice following receipt of an HMRC nudge letter, statutory enquiry or where a taxpayer has found a mistake in their filings to HMRC.

At haysmacintyre, we have a wealth of experience in making successful disclosures to HMRC under the CDF and WDF, achieving the most favourable outcome for clients, bringing closure to their earlier years’ tax affairs and allowing them to move forward.

We are here to help; should you require more information or professional advice, please contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions, or Riocard Hoye, Senior Manager.

HMRC issues ‘One to Many’ notices to charities

HMRC is issuing ‘nudge letters’ to charities.

The ‘One to Many’ approach takes the form of correspondence commonly known as nudge letters. Nudge letters usually state that HMRC holds information on the taxpayer that the letter is addressed to, and are used to encourage taxpayers to review their tax affairs.

Nudge letters are a cost-effective solution for HMRC to communicate with a large number of taxpayers. Letters previously issued either relate to a potential loss of tax that HMRC has identified or, more broadly, are an educational exercise.

This latest nudge letter campaign is an educational letter, helping charities to get their Gift Aid claims on aggregated donations right, together with a reminder of their Gift Aid record-keeping requirements.

Disclosures and penalties

If you find a mistake in your filings to HMRC, disclosing the error or omission before HMRC sends a nudge letter or opens an enquiry will lead to the most favourable outcome. Following receipt of a nudge letter, a disclosure to HMRC will be treated as ‘prompted’ for penalty purposes. Prompted penalty rates are higher than those that apply to unprompted penalties. Completely voluntary disclosures to HMRC benefit from the lowest possible penalty range for the type of error, and the length of time interacting with HMRC will be significantly shorter, compared to a full investigation.

A professional tax advisor can guide you through the disclosure process and advise, where applicable, of the penalty mitigation available. We recommend taxpayers immediately seek professional advice if they have found a mistake in their filings to HMRC.

At haysmacintyre, we have a wealth of experience in making successful disclosures to HMRC. Should you have any queries regarding your Gift Aid claims, please do not hesitate to contact Louise Veragoo, Not for Profit Tax Director, or Danielle Ford, Partner and Head of Tax Disputes & Resolutions.

HMRC and the 2019 loan charge

Previously, loan schemes, known as ‘disguised remuneration’ (DR), were marketed. DR schemes involved paying employees through loans instead of PAYE, and it was a way to avoid paying Income Tax and National Insurance. These loans were usually interest free, non-repayable in practice and involved the use of Employee Benefit Trusts (EBT) or Employer Financed Retirement Benefit Schemes (EFRBS).

The DR schemes have since been categorised by HMRC as tax avoidance schemes and state they do not work. The government moved to recover lost tax, setting a deadline of 30 September 2020 for taxpayers to reach a settlement with HMRC or repay the loans, otherwise the controversial loan charge would be applied.

The loan charge

The loan charge is a tax charge designed to collect unpaid tax, in relation to the DR loan schemes. The loan charge amounted to tax on the total value of all loans outstanding, as of 5 April 2019, to be declared in the 2018/19 Self Assessment tax return.

When it was first introduced, the loan charge received a lot of attention, including discussion in Parliament, and in 2019 a review into this legislation was commissioned. The review recommended various changes, including spreading the loan charge over the tax years 2018/19, 2019/20, and 2020/21

The loan charge applies to loans made between 9 December 2010 and, either 5 April 2019 for employees, or 5 April 2017 for self-employed individuals.

Following a review, all loans made prior to 9 December 2010 fall outside the scope for Loan charge purposes, as well as loans issued between 10 December 2010 to 5 April 2016, where reasonable disclosure was made to HMRC.

HMRC holds information on those it believes are subject to the loan charge and has been checking tax filings (or lack thereof). HMRC is now acting against those it believes have not properly declared the loan charge, either by not declaring or under-declaring it, in the following ways:

  • Opening enquiries
  • Sending nudge letters
  • Raising discovery assessments for lost tax

Opening enquiries

If HMRC receives a return on or before the filing date, an enquiry can be opened within 12 months. An enquiry can be long running and intrusive and allows HMRC to check the correct tax has been paid in the tax year of enquiry.

However, HMRC is now out of time to enquire into your 2018-2019 tax return, in relation to the loan charge, if you filed on time. This does not mean you are in the clear, as HMRC will open a discovery assessment (see below) or, if you did not file at all, HMRC may be able to open an enquiry.

It is important to note that paying the loan charge does not necessarily resolve the underlying HMRC enquiries for the years in which loans were made. Tax years that are subject to an open enquiry or assessment will still need to be resolved, either by way of settlement with HMRC or, in extreme cases, through litigation.

HMRC issuing nudge letters

HMRC has been utilising a ‘one-to-many’ approach, commonly known as ‘nudge letters’ – this is where the same communication is sent to multiple taxpayers. We have seen HMRC sending nudge letters to prompt those who have not declared, nor paid, the loan charge but should have, according to its records.

This gives taxpayers a chance to disclose the required information before any further action is taken by HMRC, as well as paying any penalties or interest which may be due.

HMRC has been inviting those who may be subject to the loan charge to submit a 2018/19 tax return or to make a disclosure. Whilst not stated as an option on the letter, a professional advisor will be able to assist with further information and guidance, if you believe the loan charge does not apply to you.

Discovery assessment and penalties

HMRC has started to issue discovery assessments to taxpayers who it believes have not disclosed the loan charge, in their 2018/19 tax return.

Discovery assessments are a formal assessment which allow HMRC to collect any loss of tax.

The standard time limit for HMRC to make a discovery assessment is four years, which can be extended to six years for careless behaviour or twenty years for deliberate behaviour.

It is worth noting that you have 30 days to appeal against HMRC discovery assessments, however, if not appealed within the time limit, an assessment becomes final and therefore payable.

Professional advice

If you have received a communication from HMRC, or believe you may fall foul of the loan charge, we recommend that you speak to a professional tax advisor. Communications from HMRC must be taken seriously and you must act quickly to mitigate penalties and interest, where applicable and if possible.

At haysmacintyre, we understand the stress caused by HMRC in relation to the loan charge. We guide our clients through every step of the process, resolving matters in an efficient way, to ensure a clean slate going forward

For any advice or to have a discussion, contact Danielle Ford, Partner and Head of Tax Disputes & Resolutions or Riocard Hoye, Senior Manager.

Code of Practice 9 enquiries – football agents

What is COP9?

Code of Practice 9 is HMRC’s most serious civil investigation type, which carries an allegation by HMRC of fraud or deliberate behaviour leading to a tax loss.

COP9 is one step away from criminal prosecution and is seen as the ‘last chance’ by HMRC – make a full disclosure and pay the tax, in exchange for avoiding criminal prosecution.

The COP9 process invites a disclosure under the Contractual Disclosure Facility (CDF) where all tax matters are fully disclosed. HMRC can still open a criminal prosecution into any matters which are not disclosed or if the disclosure is incomplete.

We strongly recommend seeking specialist advice as soon as the CDF is issued, as most accountants do not have the expertise to deal with COP9, or the insurance to undertake such work. In addition, you have 60 days within which to respond and make an initial disclosure, which cannot be extended, and it is this initial disclosure which offers the protection from criminal investigation.

What are the issues HMRC is looking at?

We understand the recent COP9 enquiries have been issued in relation to commission payments.

HMRC is likely to hold concrete information on such transactions and must believe they have strong evidence of deliberate behaviour for them to allege tax fraud.

We also understand HMRC has been looking into ‘dual representation contracts’ in the Premier League. This is where the same agent represents both the player and the club in transfers, negotiations, or new contracts.

Dual representation is prohibited by FA rules, however, it can be allowed if all parties provide written consent. Under this practice, the portion of the fee relating to work for the club avoids VAT, Income Tax and National Insurance.

In 2021, HMRC updated its guidance on this issue and tightened the rules by stating clubs need to keep records of evidence that they are legitimately working on both sides of the contract, as well as showing the extent to which they represent the club and the player, rather than just splitting it 50/50.

It is clear HMRC is taking a keen interest in the tax affairs of the football industry and it has shown it is willing to use its most powerful tools available to investigate any errors.

HMRC is regularly scrutinising football and associated stakeholders due to the amount of money in the game at the top level, and therefore the tax potentially lost if a mistake is made.

If you believe there are any irregularities in relation to your tax affairs, it is strongly recommended to seek professional advice. Making a voluntary disclosure, before HMRC contacts you, will result in the most favourable outcome, both in terms of the lowest possible penalties and the shortest possible timeframe to resolution, compared to an HMRC enquiry.

Should you require any assistance, please contact Danielle Ford, Partner and Head of Tax Disputes and Resolutions or Riocard Hoye, Senior Manager.

Get in touch