What are HMRC Criminal Investigations and What do They Lead to?
The UK’s tax authority, Her Majesty’s Revenue and Customs, initiates HMRC criminal investigations 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.
HMRC conducts these investigations using its powers under the Proceeds of Crime Act 2002 and the Fraud Act 2006. The severity of the situation means that you may face not only financial penalties but also imprisonment. Because of these severe consequences, anyone under HMRC criminal investigation should immediately seek specialised legal advice.
During a criminal investigation, HMRC may use various methods to gather evidence, including surveillance and interviews[1]Trusted Source – GOV.UK – HMRC Compliance Handbook, 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[2]Trusted Source – GOV.UK – HMRC Criminal Finances Act 2017.
Given the implications of being found guilty, we recommend securing 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 organised 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.
The Importance of ‘Complete and Unprompted Disclosure’
HMRC has repeatedly emphasised the importance of complete and unprompted disclosure[3]Trusted Source – GOV.UK – Voluntary Disclosure to HMRC in tax avoidance and evasion cases. With this kind of disclosure, HMRC is much more likely to proceed with civil fraud investigation procedures rather than criminal ones.
Complete and unprompted disclosure demonstrates that you’re cooperating with HMRC and are willing to make amends for their wrongdoing.
It also allows HMRC to recover the lost tax revenue more quickly and efficiently.
Finally, it helps to deter others from committing similar offences.
The Contractual Disclosure Facility (CDF)
The Contractual Disclosure Facility (CDF) is used by HMRC 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.
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 scrutinise 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.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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