Will I be prosecuted for tax fraud?

Written 22nd April 2020 by Stephen Chinnery

HMRC have the power to prosecute you if they suspect that you have committed tax fraud.  This is a very serious matter and you should obtain specialist legal advice at the earliest possible stage.  The lawyers at Olliers Solicitors have decades of experience in dealing with both criminal and civil HMRC disputes including prosecutions.

For what reasons do HMRC prosecute?

HMRC have produced guidance as to their prosecutions policy.

HMRC will prosecute in order to protect the revenue.  Protecting the revenue is the number one priority for HMRC. The prosecution of individuals with a view to depriving people of their liberty or imposing large fines aims to ensure that people comply with the rules.

Is prosecution is always the first option for HMRC?

HMRC will aim to use the lower cost civil option of COP 9 wherever possible.  The decision to use the full power of the criminal law as a first option is reserved for those circumstances in which a strong message of deterrence has to be sent or where the conduct is so serious that only criminal proceedings are appropriate.

Can I challenge HMRC’s decision to prosecute me rather than offer a civil settlement?

In the guidance issued by HMRC say that they have complete discretion about which option they choose.

In the majority of cases that is accurate.  However, the decision making of Her Majesty’s Revenue & Customs as a public authority when exercising public law functions is subject to the scrutiny of the law in the form of Judicial Review.

Therefore, if the decision is tainted by illegality, irrationality, procedural unfairness, or offends your legitimate expectation you may have the basis to issue a claim in the High Court to have a Judge review HMRC’s decision.  It is a high bar to reach and dependent upon the facts of every case.  Strict time limits apply so urgent advice ought to be obtained.  The solicitors at Olliers Solicitors have significant experience in dealing with Judicial Review claims against HMRC.

What could I achieve if I challenged HMRC’s decision making?

In the event that your claim succeeded a Court could make one of the following orders:

  • An order to quash the decision.  In this way the decision would be set aside.
  • A mandatory order requiring HMRC to carry out it’s proper legal functions.
  • A prohibiting order restraining HMRC from acting beyond its powers.

Any decision to challenge the decision making powers of HMRC by way of Judicial Review would have to be carefully considered by Olliers Solicitors as experienced tax litigation lawyers.

Are there any areas where HMRC will always prosecute first?

The Guidance issued by HMRC says that cases of “bogus” VAT registration with a view to procuring a refund or organised Tax Credit fraud are areas where prosecution will always be the first option.

Our experience as senior tax lawyers tells us that is not always the case.  In the case of “bogus” VAT registrations eliciting fraudulent refunds when there are cases that involve even a modicum of sophistication it is clear that HMRC consider a much wider range of tools other than the blunt instrument of prosecution.  This range of other tools may include some of the following:

  • Winding Up or bankruptcy proceedings including Provisional Liquidation
  • Post insolvency claims
  • Directors Disqualification
  • Bankruptcy Restriction Orders
  • Personal Liability Orders
  • Civil Freezing Orders
  • Civil Recovery Orders under Part 5 of the Proceeds of Crime Act 2002

Contact Olliers Solicitors for a full discussion of the range of measures that HMRC may bring to bear upon you.

In what circumstances is it likely that HMRC will generally consider prosecution as a first option?

HMRC are like to prosecute as a first option in the following circumstances:

  • 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

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