If HMRC suspects an individual of serious fraud, then it may decide to pursue a criminal investigation. If you are concerned that you could be subject to an HMRC criminal investigation, or HMRC is already building a case against you, here’s what you need to know.
HMRC criminal investigation solicitors
You are entitled to free legal representation during all police station interviews. You are also advised to instruct a defence solicitor if HMRC has accused you of serious fraud. Our fraud and financial crime solicitors can help you. Contact us now for a free initial enquiry.
Can HMRC conduct criminal investigations?
Yes, HMRC can (and does) conduct criminal investigations. However, it is by no means the norm. HMRC prefers to resolve incidents of tax evasion and tax fraud via civil proceedings. In HMRC’s eyes, it is faster, more cost-effective and easier to get a result.
But HMRC will choose to conduct a criminal investigation if it ‘needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.’ This might happen:
- In cases of organised criminal gangs attacking the tax system or systematic frauds where losses represent a serious threat to the tax base, including conspiracy
- Where an individual holds a position of trust or responsibility, such as solicitor, accountant or tax advisor
- Where materially false statements are made or materially false documents are provided in the course of a civil investigation
- Where, pursuing an avoidance scheme, reliance is placed on a false or altered document or such reliance or material facts are misrepresented to enhance the credibility of a scheme
- Where deliberate concealment, deception, conspiracy or corruption is suspected
- In cases involving the use of false or forged documents
- In cases involving importation or exportation breaching prohibitions and restrictions
- In cases involving money laundering with particular focus on advisors, accountants, solicitors and others acting in a ‘professional’ capacity who provide the means to put tainted money out of reach of law enforcement
- Where the perpetrator has committed previous offences or there is a repeated course of unlawful conduct or previous civil action
- In cases involving theft, or the misuse or unlawful destruction of HMRC documents
- Where there is evidence of assault on, threats to, or the impersonation of HMRC officials
- Where there is a link to suspected wider criminality, whether domestic or international, involving offences not under the administration of HMRC
What is the Fraud Investigation Service?
The Fraud Investigation Service (FIS) is a department within HMRC. FIS officers are tasked with unlocking the most complex financial crimes. HMRC states that since the department’s creation in 2016, “more than £1 billion has been recovered from the proceeds of crime and tax offenders”.
FIS is one of just two departments within HMRC that holds criminal investigation powers. The other is the Risk and Intelligence Service (RIS).
As Simon York, HMRC’s Director of Fraud Investigation Service, explained: “HMRC deploys cutting-edge technology to investigate unexplained wealth and uncover hidden assets. Last year alone, we recouped more than £218 million from proceeds of crime.
Therefore, if you are investigated by HMRC for serious fraud, it is likely to be conducted by FIS officers.
What powers do HMRC have?
HMRC has a wide range of powers. It can:
- Conduct interviews under caution – remember that you are entitled to legal representation during these interviews
- Arrest people – certain HMRC officers do not need an arrest warrant and can arrest you if they have reasonable grounds to suspect that you have committed an offence
- Search property – including conducting dawn raids. However, HMRC must get a search warrant first
- Seize cash and items connected to an investigation – which can then be sent for analysis and retained for the duration of the investigation
- Apply for Production Orders – if granted by the court, it demands that an individual or organisation produces information relevant to HMRC’s investigation
- Apply for Account Freezing Orders – if granted by the court, the suspect’s accounts will be frozen
- Apply for Confiscation Orders – if someone is convicted for tax evasion, HMRC can request the forfeiture of assets obtained via criminal means
- Impose civil penalties – HMRC can collect up to 20 years’ worth of unpaid tax where fraud is alleged and impose a financial penalty of up to 200% of the tax owed
HMRC also has a vast amount of data at its fingertips, some of which is provided by third parties such as your bank. This is fed into a sophisticated system called ‘Connect’. It knows what your property income is, your bank interest and other lifestyle factors. All this information is cross-reference to identify anomalies. This may flag something in the system which HMRC officers decide to investigate in greater detail. This is one of the things that may trigger an HMRC investigation.
What turns an HMRC investigation into a criminal investigation?
HMRC may switch from a civil investigation to a criminal investigation if:
- The person under investigation lies to HMRC
- The person under investigation fails to provide complete disclosure under the Contractual Disclosure Facility
- The person under investigation refuses to participate in the Contractual Disclosure Facility (or does not respond)
- The severity of the crime is worse than originally thought, warranting a criminal investigation
As mentioned above, HMRC prefers to carry out civil investigations. HMRC has different Codes of Practice for dealing with different situations. The most commonly used where fraud is suspected is Code of Practice 9 (COP9). When someone receives a COP9 letter, they are told that they are under investigation and are invited to participate in the Contractual Disclosure Facility (CDF). The CDF is a contract between you and HMRC. You agree to provide full disclosure regarding your fraudulent behaviour. In return, HMRC promises that you will be immune from criminal prosecution.
If you are not entirely honest with HMRC, then officers may choose to penalise you by switching from a civil investigation to a criminal investigation. This might happen if you outright lie to HMRC, or you decide not to disclose certain details during a COP9 investigation. It can also happen if you refuse to participate in the CDF or you simply fail to respond within 60 days (which HMRC will take as a refusal).
Alternatively, HMRC may start with a civil investigation, only to uncover what it believes to be serious fraud. If so, the investigation may become a criminal investigation.
What happens if you lie to HMRC?
If you lie to HMRC, officers are more likely to carry out a criminal investigation into your actions, as opposed to a civil one.
You may also face heavier penalties if civil proceedings are continued. HMRC will decide what penalty to impose. Reductions are made for individuals who co-operate with HMRC, particularly where they voluntarily disclose wrongdoing.
How do I know if HMRC are investigating me?
If HMRC is conducting a criminal investigation, then you might not know about it until you are arrested, subject to a dawn raid or invited for an interview under caution. We recommend getting legal advice as soon as you realise that you are the focus of an HMRC investigation.
If HMRC is conducting a civil investigation, then it might start ‘softly’ with a standard compliance check. At some point, HMRC will send you an official letter of investigation. If you are being invited to the CDF, then you will also receive a COP9 leaflet explaining your options. You have 60 days to decide what to do.
How do I deal with an HMRC investigation?
The way in which you deal with an HMRC investigation very much depends on the circumstances. If the investigation is a criminal one, you need to contact our fraud and financial crime solicitors at the earliest available opportunity. Do not answer any HMRC or police questions until you have a legal representative with you. If you are pressed into answering, politely decline and say that you want to talk to a lawyer first. You cannot stop a search and seizure happening, so it is futile to try. Even so, you should contact a solicitor when you can, possibly even while the raid is underway.
Your solicitor can then advise you on the best way to deal with an HMRC investigation. If accept the allegations, then it is probably preferable to plead guilty and co-operate with the investigation. It may even be possible to avoid a criminal prosecution and resolve the matter via civil proceedings instead. This means that you avoid the risk of imprisonment and confiscation proceedings.
Do HMRC always prosecute?
HMRC only investigates criminal allegations of fraud, tax evasion, money laundering and other financial crimes. The decision whether to prosecute lies with the Crown Prosecution Service (CPS). HMRC will hand the findings of their investigation over to the CPS, and prosecutors will decide whether to pursue charges. If there is not enough evidence to support a conviction, then the case against you should not proceed.
It may also be possible to avoid criminal proceedings by negotiating with HMRC. Sometimes, you can resolve the matter through civil proceedings, even if HMRC originally started a criminal investigation. You can also avoid a full-scale trial by pleading guilty. However, you should only do this if you accept the charges against you. If so, an early guilty plea means that your sentence will be discounted. Your solicitor can also present mitigating factors to the judge which should persuade them to show leniency when deciding your sentence.
Can HMRC forfeit assets?
If you are found guilty of fraud or another financial crime, HMRC may begin confiscation proceedings under the Proceeds of Crime Act (POCA) 2002. If successful, it would see that any assets gained via illegal means are permanently seized by the authorities. Additional penalties can be imposed for non-compliance.
Read more: What is a Confiscation Order?
Should I get a solicitor for an HMRC investigation?
You do not have to instruct a solicitor if you are being investigated by HMRC – but it is strongly recommended. A solicitor can work on your behalf to get the best possible result. At Ashmans Solicitors, we represent those facing criminal allegations of fraud, tax evasion, money laundering and other financial crimes. Whatever the charges against you, we can help you going forward.
We offer free police station representation and are members of the Legal Aid scheme.
Speak to our fraud solicitors – England and Wales
We understand that an HMRC criminal investigation is a scary prospect. When you instruct our fraud solicitors, you benefit from our support and guidance throughout the whole process. We are experts in this area of law and know how to get a positive outcome on your behalf.
You can call us on 0333 009 6275. We are available 24 hours a day, 7 days a week.