Does HMRC Undertake Covert Investigations on Companies?

HMRC is certainly not averse to using covert investigations, where necessary, to expose tax fraud or criminality. Members of their Enforcement and Compliance Taskforce have broad powers to expose tax evasion, which include entering business premises in disguise, or simply posing as customers. In addition, HMRC has a state of the art computer system, known as ‘Connect’ (designed by defence contractor BAE Systems) which analyses data to find instances where individuals lifestyles appear to exceed their means. Connect is known as the jewel in the crown of HMRC’s investigation unit and is often the catalyst for officers to take to the field for undercover operations.

HMRC uses its own staff as well as other civil fraud and criminal investigation services as allowed under Section 9. In the majority of cases fraud and criminal activity will be suspected and warrant further investigation. HMRC will use every means at its disposal where it believes it has the right to investigate undercover in such areas as:

  • There is a deliberate attempt to defraud and or withhold VAT payments
  • There is a the deliberate destruction of incriminating documents
  • There is a systematic attempt by organised criminal gangs attacking the system
  • False documents are being used
  • False information is being provided

HMRC’s and  Cash Businesses

Restaurants, taxi firms takeaways and other businesses where cash payments are common, are a typical area where covert investigations occur. HMRC may send in customers or ‘mystery shoppers’ to pay in cash, which it will later check against tax records. Test purchases that do not show up give them definitive proof money that is not being declared.

HMRC keeps a very close watch on all cash related businesses and will often conduct undercover checks based on tip offs often from disgruntled staff.

Intrusive Surveillance Measures

Where serious criminal activity is implicated, HMRC may apply to use the powers described in the Regulation of Investigatory Powers Act 2000 (RIPA). These include covert surveillance and covert human intelligence, as well as interception of post and telecommunications, and property interference. These measures are used only in particular situations, however, since they require high level approval a court order may be necessary.

Author: Mike Smith

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