HMRC Criminal Investigations

If you find yourself facing an HMRC criminal investigation, usually reserved for severe cases of tax fraud, taking immediate action is crucial. Securing specialist legal advice can make a significant difference in navigating the complexities ahead.

In this article, we’ll break down what you can expect during an HMRC criminal investigation, emphasizing the importance of expert legal guidance.

What are HMRC Criminal Investigations?

HMRC criminal investigations are initiated by the UK’s tax authority, Her Majesty’s Revenue and Customs, to investigate serious instances of tax fraud. Unlike civil investigations, which focus on recovering lost taxes and penalties, criminal investigations aim to prosecute the individual or business involved. These investigations are rare and only undertaken when there is a suspicion of deliberate and significant fraud that cannot be adequately addressed through civil means.

HMRC uses its powers under the Proceeds of Crime Act 2002 and the Fraud Act 2006 to conduct these investigations. The severity of the situation means that the accused may face not only financial penalties but also imprisonment. It is because of these severe consequences that anyone under HMRC criminal investigation should immediately seek specialised legal advice.

During an HMRC criminal investigation, HMRC may use various methods to gather evidence, including surveillance and interviews, under caution. Financial records will be closely scrutinised, and any discrepancies could lead to severe repercussions, including assets being seized under the Criminal Finances Act 2017.

Given the life-altering implications of being found guilty, it is essential to secure expert legal representation as early as possible. A criminal tax lawyer can provide invaluable advice tailored to the complexities of criminal tax law and represent your interests throughout the investigation.

What Triggers a Criminal Investigation by HMRC?

Although HMRC can conduct criminal investigations in any case, there are certain offences that are more likely to trigger a criminal investigation than a civil one. These include:

• Cases involving organized criminal gangs or conspiracy
• Cases where the offender holds a position of responsibility or trust
• Cases where there is evidence of materially false statements or forged documents being provided during a civil investigation
• Cases of deliberate corruption, conspiracy, deception, or concealment
• Cases where forged documents have been used
• Cases of clear breaches of import or export prohibitions
• Cases of money laundering, with particular focus on financial advisors, accountants, and solicitors who have facilitated the process
• Cases where perpetrators are repeat offenders, demonstrating a pattern of unlawful conduct
• Cases involving the theft, misuse, or destruction of HMRC documents
• Cases involving threats to HMRC officials
• Cases hinting at wider criminality that extends beyond the administration of HMRC

In addition to the above, HMRC may also launch a criminal investigation if they believe that a civil investigation is not sufficient to address the seriousness of the offence or to deter others from committing similar offences.

The Importance of ‘Complete and Unprompted Disclosure’

HMRC has repeatedly emphasized the importance of complete and unprompted disclosure in tax avoidance and evasion cases. When an individual or business makes a complete and unprompted disclosure, HMRC is much more likely to proceed with civil fraud investigation procedures rather than criminal ones.

There are several reasons for this. First, complete and unprompted disclosure demonstrates that the individual or business is cooperating with HMRC and is willing to make amends for their wrongdoing. Second, it allows HMRC to recover the lost tax revenue more quickly and efficiently. Third, it helps to deter others from committing similar offences.

The Contractual Disclosure Facility (CDF)

The Contractual Disclosure Facility (CDF) is a process that HMRC uses to allow individuals to disclose tax fraud without facing criminal prosecution. If you are under investigation by HMRC for tax fraud, you may be offered a CDF contract. This contract will require you to fully disclose all of your tax fraud and to cooperate with HMRC’s investigation. If you sign the contract and comply with its terms, HMRC will not prosecute you for tax fraud.

If you refuse to sign the CDF contract, HMRC is likely to pursue criminal prosecution.

Here is a more detailed explanation of the CDF process:

1. HMRC offers the CDF contract to individuals who they suspect have committed tax fraud.
2. The individual must decide whether to accept or reject the CDF contract.
3. If the individual accepts the CDF contract, they must fully disclose all of their tax fraud and cooperate with HMRC’s investigation.
4. HMRC will review the individual’s disclosure and investigate the tax fraud.
5. If HMRC is satisfied with the individual’s disclosure and cooperation, they will not prosecute the individual for tax fraud.

Powers of the HMRC criminal investigator

HMRC criminal investigators have extensive powers to gather evidence for prosecuting serious tax fraud cases. They operate under legislation such as the Proceeds of Crime Act 2002, the Fraud Act 2006, and the Criminal Finances Act 2017, which grant them authority beyond the scope of civil inquiries.

Some of the significant powers at their disposal include:

• Searches: HMRC investigators can search homes, offices, and storage units and seize documents, computer files, and any other items relevant to the case. In certain circumstances, they may also be granted permission to conduct covert surveillance.
• Interviews: Investigators can summon individuals for interviews under caution, during which anything said can be used as evidence in court.
• Financial records: Investigators can demand financial records, bank statements, and transaction histories to scrutinize for any irregularities.
• Asset freezing: Investigators can freeze assets if they believe they have been gained illegally. This could affect not only the individual under investigation but also third parties holding assets on their behalf.

Failure to comply with HMRC’s demands during a criminal investigation can lead to additional charges, including obstruction of justice.