An HMRC Criminal Investigation is undertaken by HMRC where they suspect serious tax fraud has occurred and have decided to investigate with a view to prosecution, rather than on a civil basis to secure the tax, interest and penalty. Aka Criminal Tax Investigation.
If a case is investigated criminally rather than civilly, the burden of proof shifts from the client/defendant to the prosecution party. This means that you are not considered guilty of the tax fraud alleged unless HMRC can prove it (to a very high bar). This is different to cases which are investigated civilly (i.e. COP8 or COP9), where the starting point can be that any cash deposits for example are considered taxable receipts unless you can prove otherwise.
If HMRC have started a criminal tax investigation into your affairs or your client’s, it means that they consider they have irrefutable proof that the tax fraud has occurred.
The HMRC criminal investigation may have been selected due to a deemed lack of co-operation with another (civil) investigation like a COP9, or because they have identified something demonstrably fraudulent/dishonest during a COP8 investigation.
HMRC Criminal Investigation
Regardless of the reason(s), if you or your client are the subject of a criminal tax investigation (or you consider that you/they may be soon), it is vital that you act immediately to protect yourself from the significant consequences which can flow from this.
We would strongly suggest speaking to a professional who can advise on any tax matters and work alongside a criminal defence lawyer to ensure that you are roundly protected in the case of an HMRC criminal investigation.
Expert advice at the earliest possible time will ensure that HMRC do not obtain information they are not entitled to, that you adhere to all relevant deadlines and that any opportunities to get the case treated on a civil basis instead are properly explored and secured as appropriate.
See HMRC’s Criminal Investigation Policy, to understand how they select such cases.
HMRC Criminal Investigation
Why have I received this Notice?
Before commencing a criminal tax investigation, HMRC will have undertaken substantial work to verify the data that they hold. HMRC will believe that there has been an underpayment of tax and that this underpayment has been deliberately / fraudulently manufactured. In an HMRC criminal investigation they are not looking to merely risk assess.
As tax evasion is a criminal offence, Cheating the Public Revenue carries a maximum prison sentence of life.
As set out in HMRC’s powers and safeguards guidance, HMRC is not responsible for deciding if a case will be criminally prosecuted but it conducts the criminal tax investigation. That decision is made by the independent prosecution authorities.
It’s HMRC’s policy to deal with fraud by use of the cost effective civil fraud investigation procedures under Code of Practice 9 wherever appropriate. An HMRC criminal investigation is reserved for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.
Its important to note that HMRC reserves complete discretion to conduct a criminal investigation in any case and to carry out these investigations across a range of offences and in all the areas for which the Commissioners of HMRC have responsibility.
This is not an exhaustive list, by these are examples of the kind of circumstances in which HMRC will generally consider starting a criminal tax investigation, rather than a civil investigation:
- 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
- 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
When considering whether a case should be investigated using the civil fraud investigation procedures under Code of Practice 9 or is the subject of a criminal investigation, one factor will be whether the person has made a complete and unprompted disclosure of the offences committed. Which is why co-operation and voluntary disclosures are always recommended.
HOW CAN PURE TAX INVESTIGATIONS HELP?
At Pure Tax our Tax Investigation & Disclosure specialists are industry recognised and have dealt with hundreds of contentious situations with HMRC over the years. We are adept at managing interactions with the tax authorities to ensure that the investigation and disclosure processes run smoothly and that your interests are best protected.
