What You Need to Know About HMRC Criminal Investigations (2024)

If HMRC suspects an individual of serious fraud, then it may decide topursue acriminal investigation. If you are concerned that you could be subject toan HMRC criminal investigation, or HMRC is already building acase against you, here’s what you need toknow.

HMRC criminal investigation solicitors

You are entitled tofree legal representation during all police station interviews. You are also advised toinstruct adefence solicitor if HMRC has accused you of serious fraud. Our fraud and financial crime solicitors can help you. Contact us now for afree initial enquiry.

Can HMRC conduct criminal investigations?

Yes, HMRC can (and does) conduct criminal investigations. However, it is byno means the norm. HMRC prefers toresolve incidents of tax evasion and tax fraud via civil proceedings. In HMRC’s eyes, it is faster, more cost-effective and easier toget aresult.

But HMRC will choose toconduct acriminal investigation if it ‘needs tosend astrong deterrent message or where the conduct involved is such that only acriminal sanction is appropriate.’ This might happen:

• In cases of organised criminal gangs attacking the tax system or systematic frauds where losses represent aserious threat tothe tax base, including conspiracy
• Where an individual holds aposition 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 acivil investigation
• Where, pursuing an avoidance scheme, reliance is placed on afalse or altered document or such reliance or material facts are misrepresented toenhance the credibility of ascheme
• 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 toput tainted money out of reach of law enforcement
• Where the perpetrator has committed previous offences or there is arepeated 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 alink tosuspected 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 adepartment 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 toinvestigate unexplained wealth and uncover hidden assets. Last year alone, werecouped more than £218 million from proceeds of crime.

Therefore, if you are investigated byHMRC for serious fraud, it is likely tobe conducted byFIS officers.

What powers doHMRC have?

HMRC has awide range of powers. It can:

• Conduct interviews under caution – remember that you are entitled tolegal representation during these interviews
• Arrest people – certain HMRC officers donot need an arrest warrant and can arrest you if they have reasonable grounds tosuspect that you have committed an offence
• Search property – including conducting dawn raids. However, HMRC must get asearch warrant first
• Seize cash and items connected toan investigation – which can then be sent for analysis and retained for the duration of the investigation
• Apply for Production Orders – if granted bythe court, it demands that an individual or organisation produces information relevant toHMRC’s investigation
• Apply for Account Freezing Orders – if granted bythe 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 to20 years’ worth of unpaid tax where fraud is alleged and impose afinancial penalty of up to200% of the tax owed

HMRC also has avast amount of data at its fingertips, some of which is provided bythird parties such as your bank. This is fed into asophisticated system called ‘Connect’. It knows what your property income is, your bank interest and other lifestyle factors. All this information is cross-reference toidentify anomalies. This may flag something in the system which HMRC officers decide toinvestigate in greater detail. This is one of the things that may trigger an HMRC investigation.

What turns an HMRC investigation into acriminal investigation?

HMRC may switch from acivil investigation toacriminal investigation if:

• The person under investigation lies toHMRC
• The person under investigation fails toprovide complete disclosure under the Contractual Disclosure Facility
• The person under investigation refuses toparticipate in the Contractual Disclosure Facility (or does not respond)
• The severity of the crime is worse than originally thought, warranting acriminal investigation

As mentioned above, HMRC prefers tocarry 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 aCOP9 letter, they are told that they are under investigation and are invited toparticipate in the Contractual Disclosure Facility (CDF). The CDF is acontract between you and HMRC. You agree toprovide 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 topenalise you byswitching from acivil investigation toacriminal investigation. This might happen if you outright lie toHMRC, or you decide not todisclose certain details during aCOP9 investigation. It can also happen if you refuse toparticipate in the CDF or you simply fail torespond within 60 days (which HMRC will take as arefusal).

Alternatively, HMRC may start with acivil investigation, only touncover what it believes tobe serious fraud. If so, the investigation may become acriminal investigation.

Read more: Civil or Criminal Proceedings for Serious Fraud?

What happens if you lie toHMRC?

If you lie toHMRC, officers are more likely tocarry out acriminal investigation into your actions, as opposed toacivil one.

You may also face heavier penalties if civil proceedings are continued. HMRC will decide what penalty toimpose. Reductions are made for individuals who co-operate with HMRC, particularly where they voluntarily disclose wrongdoing.

How doIknow if HMRC are investigating me?

If HMRC is conducting acriminal investigation, then you might not know about it until you are arrested, subject toadawn raid or invited for an interview under caution. Werecommend getting legal advice as soon as you realise that you are the focus of an HMRC investigation.

If HMRC is conducting acivil investigation, then it might start ‘softly’ with astandard compliance check. At some point, HMRC will send you an official letter of investigation. If you are being invited tothe CDF, then you will also receive aCOP9 leaflet explaining your options. You have 60 days todecide what todo.

How doIdeal with an HMRC investigation?

The way in which you deal with an HMRC investigation very much depends on the circ*mstances. If the investigation is acriminal one, you need tocontact our fraud and financial crime solicitors at the earliest available opportunity. Donot answer any HMRC or police questions until you have alegal representative with you. If you are pressed into answering, politely decline and say that you want totalk toalawyer first. You cannot stop asearch and seizure happening, so it is futile totry. Even so, you should contact asolicitor when you can, possibly even while the raid is underway.

Your solicitor can then advise you on the best way todeal with an HMRC investigation. If accept the allegations, then it is probably preferable toplead guilty and co-operate with the investigation. It may even be possible toavoid acriminal prosecution and resolve the matter via civil proceedings instead. This means that you avoid the risk of imprisonment and confiscation proceedings.

DoHMRC always prosecute?

HMRC only investigates criminal allegations of fraud, tax evasion, money laundering and other financial crimes. The decision whether toprosecute lies with the Crown Prosecution Service (CPS). HMRC will hand the findings of their investigation over tothe CPS, and prosecutors will decide whether topursue charges. If there is not enough evidence tosupport aconviction, then the case against you should not proceed.

It may also be possible toavoid criminal proceedings bynegotiating with HMRC. Sometimes, you can resolve the matter through civil proceedings, even if HMRC originally started acriminal investigation. You can also avoid afull-scale trial bypleading guilty. However, you should only dothis 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 tothe judge which should persuade them toshow 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 bythe authorities. Additional penalties can be imposed for non-compliance.

Read more: What is aConfiscation Order?

Should Iget asolicitor for an HMRC investigation?

You donot have toinstruct asolicitor if you are being investigated byHMRC – but it is strongly recommended. Asolicitor can work on your behalf toget the best possible result. At Ashmans Solicitors, werepresent those facing criminal allegations of fraud, tax evasion, money laundering and other financial crimes. Whatever the charges against you, wecan help you going forward.

We offer free police station representation and are members of the Legal Aid scheme.

Speak toour solicitors – England and Wales

We understand that an HMRC criminal investigation is ascary prospect. When you instruct our fraud solicitors, you benefit from our support and guidance throughout the whole process. Weare experts in this area of law and know how toget apositive outcome on your behalf.

You can call us on 03330096275. Weare available 24 hours aday, 7 days aweek.

You can also email us on enquiries@ashmanssolicitors.com or complete our Free Online Enquiry Form and wewill contact you.