An HMRC Criminal Investigation will be considered where they suspect that a significant amount of revenue has been lost by way of fraud or another form of deliberate conduct. An HMRC Criminal Investigation, rather than a civil inquiry, will also be conducted when they want to send out a strong deterrent message or where they regard the alleged conduct to be so serious that it is necessary.
REASONS FOR AN HMRC INVESTIGATION
HMRC criminal investigations are likely to occur when HMRC suspects:
Deliberate filing of inaccurate Tax Returns or VAT Returns including income tax evasion;
• Deliberate failure to file Tax Returns or VAT Returns;
• Use of false or forged documents;
• Concealment, deception, or corruption;
• Failure to provide full and accurate disclosure in an investigation or settlement;
• Money laundering;
• Conspiracy with others to evade tax or duty;
• Involvement of a professional (tax adviser, accountant or lawyer), particularly if they advise or act for taxpayers (as they will be viewed as ‘a source of infection’);
• VAT Missing Trader Intra-Community (MTIC) or carousel fraud;
• VAT ‘bogus’ or ‘hijacked’ registration repayment fraud;
• Breach of import or export prohibitions or restrictions (‘sanctions busting’);
• A Contractual Disclosure Facility (CDF) has been offered under Code of Practice 9 (COP9) but the taxpayer has chosen to reject/ignore the offer.
POWERS OF THE HMRC CRIMINAL INVESTIGATOR
The HMRC Criminal Investigator has strong powers. Last year there were nearly 600 dawn raids (search and seizure) at homes and business premises, which is three times as many as four years ago, and is often accompanied by the arrest of the taxpayer. Routinely, HMRC will also covertly obtain warrants and court orders to require banks, advisers and even accountants to provide records and financial information about a taxpayer.
HMRC also has the power to apply without notice (ie. behind closed doors) for a Restraint Order under the Proceeds of Crime Act (POCA) to freeze all the assets of the person being investigated until the outcome of the investigation and any subsequent court proceedings.
In the last year, HMRC’s Criminal Investigation team lived up to its previous promise by bringing nearly 1300 tax fraud prosecutions resulting in a total of over 400 years in prison sentences. As well as some high profile, serious cases this confirmed a toughening approach as many cases involved relatively minor tax evasion, VAT evasion, and duty evasion (tobacco and alcohol smuggling, and fuel duty, especially red diesel).
CONFISCATION ORDERS & OTHER POWERS
The HMRC Criminal Investigation team will always consider additionally seeking a Confiscation Order under the Proceeds of Crime Act (POCA) to obtain the tax involved plus interest, following a successful prosecution. Some very draconian financial assumptions can be made against the individual. A confiscation order is always backed up by a default sentence of imprisonment for non-payment (in addition to any other sentence).
HMRC has also created a new Fraud Investigation Service (from a merger of its previous Specialist Investigations and Criminal Investigations units) and has repeated that they will be active in maintaining a similarly high rate of investigations and prosecutions going forward.
Our legal team team have significant experience in defending HMRC criminal cases includes cases with a significant international dimension and multi-million-pound frauds.
Our HMRC criminal investigating lawyers have also acted for high profile individuals.