HMRC Criminal Investigations

HM Revenue & Customs (HMRC) has the power to conduct criminal investigations when it suspects serious tax fraud, with the intention to prosecute suspects and to retrieve proceeds of tax fraud. These investigations can lead to convictions with punishments including fines and even custodial sentences. Although HMRC investigates potential criminality it does not make charging decisions. Those decisions are made by prosecuting bodies which in the main means the Crown Prosecution Service (CPS).   

Given that an HMRC investigation or worse still a prosecution, can have serious and far-reaching consequences, it is crucial to seek appropriate advice and assistance; below our Associate Solicitor, James Claughton highlights some of the key considerations to bear in mind if HMRC come knocking. 

When will HMRC conduct a criminal investigation? 

HMRC’s policy and therefore preferred approach to tackling tax fraud is through cost effective civil fraud investigation procedures under Code of Practice 9, where possible. Criminal proceedings should be a last resort and saved for matters where HMRC intends to send a “strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.”  

HMRC are likely to initiate a criminal investigation in the following circumstances;  

• Organised criminal gangs attacking tax system/systematic fraud 
• Where the suspect holds position of trust/responsibility 
• If materially false statements are made/materially false documents produced in civil investigations 
• Cases of deliberate concealment, deception, conspiracy or corruption 
• Importation or exportation breaching prohibitions and restrictions 
• Money laundering, especially advisors, accountants, solicitors and others acting in a ‘professional’ capacity  
• Where a suspect has committed previous offences  
• Theft, or the misuse or unlawful destruction of HMRC documents 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 

HMRC will not usually use civil fraud investigations in cases of VAT ‘bogus’ registration repayment fraud or organised Tax Credit fraud. 

What powers do HMRC have when conducting a criminal investigation? 

Arrest powers  

HMRC officers can arrest individuals should they suspect someone is about to commit or is committing an offence s.24 The Police and Criminal Evidence Act 1984 (PACE). 

Search powers  

HRMC can obtain and execute warrants to search premises suspected to contain evidence in relation to indictable offences (s. 8 and Schedule 1 PACE). These are more commonly known as “dawn raids” (usually conducted early morning) and allow HMRC to seize documents.  

HMRC can also enter and search premises to effect an arrest (s. 17 PACE). HMRC also has the power to enter, search and seize evidence on premises occupied or controlled by a person who is under arrest, subject to authorisation by a senior ranking investigating officer (s. 18 PACE).  

HMRC can also seize material found on premises on which an HMRC officer is lawfully present, including power to require production of electronic matter in a readable form (s. 19 PACE). 

HMRC can search an arrested person for evidence and to enter, search and seize evidence on premises where an arrested person was found immediately before arrest (s. 32 PACE). 

Information Gathering Powers 

HMRC can apply for production orders for special procedure material (s. 9 and Schedule 1). 

What are the stages of an HMRC criminal investigation? 

Intelligence/evidence gathering 

HMRC gathers intelligence from numerous third parties including banks or other financial institutions. HMRC obtains information and documentation often by using a production order under PACE s. 9 and Schedule 1, Police and Criminal Evidence Act 1984 (PACE) or s. 345 of the Proceeds of Crime Act 2002 (POCA). This compels the recipient to produce material to HMRC. 

In serious cases, the surveillance powers contained in the Regulation of Investigatory Powers Act 2000, and the Police Act 1997 can be utilised. The Investigatory Powers Act 2016 allows HMRC to request data held by telecommunication operators, including numbers dialed and the time, duration and location of a telephone call. 

Suspect notification of HMRC investigation 

Those subject to HMRC criminal investigations are often unaware and may only realise for the first time when they are subject to a dawn raid. Alternatively, they be arrested and interviewed under caution or requested to attend a voluntary interview under caution. These interviews are recorded and can be used as evidence. Therefore, if you have to attend an interview, it is crucial to instruct an expert solicitor to advise on your case. 

Charging decision  

Once HMRC has gathered the required intelligence and conducted any necessary interviews, they will prepare a file and decide whether to refer the file to the CPS or discontinue the case/take no further action or in some circumstances offer a civil settlement. 

 If the case is referred to the CPS, then the CPS will make a decision using their charging standard, which requires: 

1. sufficient evidence to provide a reasonable prospect of conviction; and  
2. bringing the case to court is in the public interest.  

Most common charges when a prosecution is brought include money laundering, fraud by false representation, cheating the public revenue, or conspiracy to defraud. These offences can carry lengthy custodial sentences and potentially unlimited fines which once again emphasises the importance of seeking appropriate advice and assistance from solicitors who have experience in defending such cases. 

What should you do when facing an HMRC investigation? 

HMRC’s powers are broad and the consequences of not responding appropriately can be serious. Records will often be critical to a successful outcome, therefore good record keeping is a must, including not only business records but all HMRC correspondence and documentation in relation to any investigation.  

If you are facing an HMRC investigation it is also wise to instruct an expert solicitor at an early stage who can advise on the best approach to take. It is crucial to do this early to preserve your legal position. Our solicitors can advise on the best course of action when facing an interview under caution, including whether you should answer the questions or not. We can engage with HMRC on your behalf, analyse your case and attend interviews under caution and prepare a robust defence to ensure the best possible outcome, as well as protecting your reputation. 

Olliers’ Associate Solicitor, James Claughton observed: 

“Even when a business or individual is confident that they have not done anything wrong, the fact is an investigation can be extremely stressful and impact on the business’ ability to operate in the normal way. Instructing the team at Olliers will immediately alleviate some of the associated stresses and together we can navigate the process with an approach tailored to your specific needs and business interests.” 

Contact Olliers Solicitors – specialist HMRC investigations lawyers 

If you or your company face investigation or prosecution please contact us – we can help. 

We have offices in both London and Manchester and our specialist team of lawyers can advise and represent you in relation to your case.