An HMRC criminal investigation is typically carried out where deliberate deceit or dishonesty is suspected. It could result in the case going to court and criminal penalties being imposed. This includes imprisonment and confiscation proceedings.
HMRC Criminal Investigation v Civil Investigation
Part of HMRC’s remit is to check that individuals and businesses have paid the correct amount of tax. If there is any indication that tax has not been paid, or that benefits have been wrongfully claimed, HMRC will conduct an investigation. Officers have three options:
- Conduct a civil investigation
- Conduct a criminal investigation
- Conduct both a civil and criminal investigation at the same time
For the most part, HMRC prefers to stick to the civil route. It is faster and more cost-effective, as HMRC can recover unpaid tax without going through the criminal justice system. Sometimes, however, HMRC feels that a criminal investigation is warranted.
When will HMRC pursue a Criminal Investigation?
In its policy document, HMRC states that a: ‘criminal investigation will be reserved for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.’
So, criminal investigations are carried out where HMRC wishes to make an example of someone, or where the conduct is so serious that it warrants criminal penalties. This might include where the taxpayer:
- Is part of an organised criminal gang, or is linked to wider criminality
- Holds a position of trust or authority
- Provides false information during the course of a civil investigation
- Falsifies or misrepresents information to enhance the credibility of a tax avoidance scheme
- Is suspected of deliberate concealment, deception, conspiracy or corruption
- Uses false or forged documents
- Breaches import/export rules
- Is suspected of money laundering
- Has committed previous offences
- Is involved in theft, or the misuse or unlawful destruction of HMRC documents
- Assaults, threatens or impersonates HMRC officials
- Is suspected of VAT ‘bogus’ registration repayment fraud
- Is involved in organised Tax Credit fraud
What happens during an HMRC Criminal Investigation?
There are two departments within HMRC that hold criminal investigation powers. They are the:
- Fraud Investigation Service (FIS); and the
- Risk and Intelligence Service (RIS)
Authorised officers within these departments have wide-ranging powers. This includes the power of arrest, the ability to search premises, and the authority to apply for a production order. A production order is a court order that demands an individual or business hand over certain information or documents. HMRC can also apply for a restraint order, whereby assets are frozen until an investigation has concluded.
No two HMRC criminal investigations are the same. People often want to know what the process is, but this is dictated by the circumstances. You may become aware of the investigation after being invited for an interview under caution, or you may be subject to a dawn raid. Ultimately, HMRC will manage their investigation with the aim of supporting a future prosecution.
Will I face criminal prosecution?
That is not to say that an HMRC criminal investigation will automatically result in a court case. HMRC can only investigate fiscal crimes, be it fraud, money laundering or tax evasion. The findings of their investigation are then handed to the Crown Prosecution Service (CPS), assuming your case is being pursued in either England or Wales. The CPS will decide whether to proceed with a criminal prosecution. A prosecution will begin if there is strong evidence of wrongdoing, and it is in the public interest.
Each criminal offence has its own sentencing range, and is impacted by mitigating and aggravating factors. The maximum sentence for fraud, for example, is 10 years’ imprisonment. However, it is rare for the maximum sentence to be handed out, especially where there are mitigating factors such as co-operation with the authorities and good character references. Even so, a custodial sentence and a fine are possible where an HMRC criminal investigation results in a prosecution.
Following a conviction, the authorities will likely pursue a confiscation order too. This is a court order that demands the repayment of wealth obtained via illegal means. Non-repayment can result in further penalties.
HMRC may also pursue the civil process to collect unpaid tax, even where a criminal investigation is underway. HMRC can recover up to 20 years of unpaid tax plus interest in cases involving deceit or dishonesty.
Speak to our solicitors now
At Altion Law, we provide advice to those who are under investigation by HMRC, be it a criminal or a civil investigation. We can explain what it means and what your options are. If you believe there has been a mistake, we can represent you throughout legal proceedings.
We strongly advise you to contact us as a matter of urgency so that we can explain your legal rights and options. For a confidential discussion with a member of our team, please call us now on 01908 414990 or complete an Online Enquiry.