HMRC Investigations and the High Net Worth Unit: What Wealthy Taxpayers Need to Know

HMRC's approach to high-net-worth individuals is not passive. The Revenue dedicates substantial specialist resources to ensuring that the wealthiest segment of the taxpaying population meets its obligations — and its investigative capability has grown considerably in sophistication over the past decade. For internationally mobile high-net-worth individuals with complex financial affairs, understanding how HMRC investigates wealthy taxpayers is an important component of risk management.

The High Net Worth Unit

HMRC established the High Net Worth Unit (HNWU) to focus compliance resources on individuals with significant wealth. The Unit handles individuals whose assets exceed approximately £2 million or whose income exceeds approximately £200,000 per year, though these thresholds are applied broadly and the Unit's focus extends to complex offshore structures regardless of precise thresholds.

The HNWU is staffed by specialist officers who receive dedicated training in offshore tax planning, trust law, corporate structures, and the international tax issues most relevant to wealthy individuals. HMRC publicly reports that its compliance work on wealthy individuals generates several hundred million pounds in additional revenue annually, with average tax yield per case in the millions of pounds. The commercial case for HMRC to invest in this Unit is self-evidently strong.

Once an individual's affairs are managed by the HNWU, they are assigned a Customer Relationship Manager (CRM) — a dedicated HMRC officer who maintains an ongoing relationship with the taxpayer and their advisers. While this relationship is presented as collaborative, the CRM's primary function is to ensure that HMRC's interests are protected and that any risks are investigated.

The Connect System

HMRC's investigative capability has been transformed by its Connect data-matching system. Connect is a powerful analytical tool that aggregates and cross-references information from an exceptionally wide range of sources, including:

• UK financial institutions: bank accounts, savings accounts, investment portfolios, trust accounts
• Land Registry: property purchases, sales, and remortgages
• Companies House: directorships, shareholdings, and company financial data
• HMRC's own records: previous returns, PAYE records, VAT registrations
• Common Reporting Standard (CRS): financial account information reported by overseas banks in 100+ jurisdictions
• FATCA: US persons' overseas accounts reported to the IRS and exchanged with HMRC under the UK–US IGA
• Social media and public data: lifestyle indicators, property photographs, social media posts indicating travel, assets, or business activities
• Mortgage applications and credit data: lifestyle and wealth indicators

Connect uses sophisticated algorithms to identify discrepancies between declared income and apparent lifestyle, wealth accumulation, or offshore assets. A taxpayer who reports modest income but purchases an expensive property, makes significant overseas transfers, or holds accounts in jurisdictions that have exchanged data with HMRC under CRS may be flagged for review.

The breadth of data available to HMRC means that offshore assets are no longer safely hidden. CRS data alone covers financial accounts in over 100 jurisdictions. The era of simple offshore non-disclosure is over, and HMRC has the data to identify it.

How HMRC Opens an Enquiry

HMRC can open a formal enquiry into a Self Assessment return within 12 months of the filing deadline (so within approximately 21 months of the end of the relevant tax year for a return filed on time). Outside this window, HMRC can still raise assessments for up to four years for innocent errors, six years for careless errors, and 20 years for deliberate behaviour or offshore matters.

Enquiries may be:

• Random: HMRC selects a proportion of returns for routine compliance checks
• Risk-based: triggered by Connect risk scoring, a specific disclosure, or intelligence
• Targeted: following a widespread investigation into a particular tax avoidance scheme or sector

For HNWU taxpayers, enquiries are rarely random — they are typically triggered by a specific compliance concern identified by the CRM or by Connect.

Code of Practice 9: Civil Investigation of Fraud

Where HMRC suspects that a taxpayer has committed tax fraud, it may open an investigation under Code of Practice 9 (COP9). This is HMRC's civil fraud investigation procedure, and it is reserved for cases where HMRC has formed a reasonable belief that deliberate tax fraud has occurred.

COP9 investigations offer the taxpayer access to the Contractual Disclosure Facility (CDF). The CDF allows the taxpayer to admit to tax fraud upfront in exchange for a civil settlement rather than criminal prosecution. The taxpayer submits an outline disclosure admitting the fraud, which is then developed into a full disclosure report.

Key features of COP9:

• Criminal prosecution is off the table (provided the taxpayer cooperates fully and makes a complete disclosure). HMRC commits not to refer the matter for criminal prosecution if the CDF is accepted and completed honestly.
• Penalties are capped. Deliberate non-compliance penalties can be severe — up to 100% of the unpaid tax in domestic cases, up to 200% for offshore deliberate non-compliance — but under CDF, penalties may be substantially reduced for full and prompt cooperation.
• Refusal of CDF is risky. If a taxpayer rejects the CDF but HMRC proceeds with a COP9 investigation and finds fraud, criminal prosecution is then possible.

COP9 is a serious matter and requires specialist legal representation from the outset. The decision whether to accept the CDF — and on what basis — requires careful legal advice.

Code of Practice 8: Serious Tax Avoidance

Code of Practice 8 (COP8) is used where HMRC suspects serious tax avoidance but does not allege fraud. This is commonly used in cases involving marketed tax avoidance schemes, complex offshore arrangements, or aggressive planning that HMRC considers to be outside the spirit of the legislation.

COP8 is less severe than COP9 — there is no allegation of dishonesty, and criminal prosecution is not in contemplation. However, COP8 investigations can be extensive, involving detailed examination of transactions, correspondence, and financial records going back many years. The commercial disruption and professional costs involved can be very significant.

In COP8 cases, HMRC will typically seek to challenge the tax advantage claimed and may seek penalties for careless or deliberate behaviour depending on the nature of the planning.

Offshore Assets and HMRC's Penalty Framework

HMRC applies a specific and more severe penalty regime to offshore non-compliance compared to domestic failures. Under the offshore penalties framework:

• Careless offshore failure: penalty up to 30% of unpaid tax for a Category 1 territory, but enhanced for offshore matters in higher categories (up to 37.5% for Category 2 and up to 45% for Category 3), compared with a maximum of 30% for an equivalent domestic careless failure
• Deliberate offshore failure: penalty up to 100% of unpaid tax
• Deliberate and concealed offshore failure: penalty up to 200% of unpaid tax

The applicable rate also depends on the territory where the offshore asset or income is held, with higher penalties for so-called Category 3 territories (those that do not exchange information with HMRC under CRS or FATCA). As of 2026, most major financial centres are Category 1 or 2 following the expansion of CRS.

There is currently no offshore amnesty. Previous initiatives such as the Liechtenstein Disclosure Facility (LDF), the Offshore Disclosure Facilities, and the 2016–2017 Worldwide Disclosure Facility are now closed. Voluntary disclosures of offshore non-compliance are still available through HMRC's general disclosure procedures, but the penalty reduction benefits available through formal amnesty programmes no longer exist. Making a voluntary disclosure before HMRC raises the matter itself does, however, still result in substantially reduced penalties compared to the maximum.

Professional Privilege

An important protection in any HMRC investigation is legal professional privilege (LPP), which protects confidential communications between a lawyer and their client made for the purpose of obtaining legal advice or in connection with actual or contemplated litigation.

LPP is an absolute privilege in English law — HMRC cannot compel disclosure of privileged communications, and courts will not order production of privileged documents.

However, several important limitations apply:

• Accountant-client privilege is narrower than solicitor-client privilege. Communications with accountants (including tax advisers who are not qualified solicitors) are not protected by LPP unless they are made in the context of litigation or are made to a lawyer through the accountant. HMRC can compel an accountant to produce working papers and correspondence in many circumstances.
• The crime/fraud exception: LPP does not protect communications made for the purpose of furthering a crime or fraud. If HMRC can establish that advice was sought to facilitate a fraud, LPP does not apply.
• Third-party documents: LPP protects client-lawyer communications, not underlying documents. Documents that exist independently of the legal relationship are not privileged merely because they have been shown to a lawyer.

For individuals under investigation, ensuring that sensitive communications are conducted with a solicitor rather than merely a tax accountant significantly strengthens privilege protection.

How to Respond to an HMRC Enquiry

If HMRC opens a formal enquiry:

1. Do not respond to HMRC without taking specialist advice first. Anything said or provided to HMRC during an investigation can be used in any subsequent proceedings.

2. Appoint specialist representation. General accountants or financial advisers are not equipped to handle HMRC's specialist investigation teams. A tax investigation specialist (typically a tax barrister or solicitor with enquiry experience) should be appointed immediately.

3. Conduct an internal review. Before making any disclosure to HMRC, understand fully what the exposure is. Voluntary disclosures that are incomplete or inaccurate are treated very severely.

4. Maintain confidentiality. Communications with your legal advisers should be clearly marked as privileged. Avoid discussing the investigation in emails or messages that do not attract privilege.

5. Consider the CDF (in COP9 cases) carefully. The decision whether to accept the CDF is one of the most consequential decisions in a fraud investigation. Take independent specialist legal advice.

How Global Investments Can Help

Global Investments works with high-net-worth individuals and their families to ensure that their financial affairs are structured and reported in a way that minimises the risk of HMRC challenge. We do not provide legal or tax advice directly, but work closely with specialist tax solicitors, barristers, and accountants to support clients in:

• Reviewing offshore structures and ensuring CRS/FATCA reporting is complete and accurate
• Conducting pre-investigation health checks to identify and address any compliance gaps before HMRC raises them
• Voluntary disclosure support — identifying the most appropriate route to regularise any historic non-compliance before HMRC acts
• Coordinating professional representation in the event of an HMRC enquiry

Tax treatment depends on individual circumstances and may change in future. The penalty and investigation framework described in this guide reflects the position as of June 2026 but is subject to change. This guide does not constitute legal advice. Always obtain qualified specialist advice if you believe you may have an HMRC compliance exposure.

Contact Global Investments for a confidential initial discussion about your tax compliance position.