This blog was co-authored by Olivia Gregson and Evan Wright.

What do they do?

HMRC Fraud Investigation Service have the ability to investigate situations where there is suspected tax evasion or tax fraud. This can be triggered by unusual activity or inconsistencies between tax returns.

General tax enquiries are not inherently criminal and can be dealt with using civil powers. Civil fraud investigations are implemented under Code of Practice 9 (COP 9), which gives the accused an opportunity to disclose any deliberate or non-deliberate behaviour which may have led to a loss of tax. The disclosure is done through the Contractual Disclosure Facility; you have 60 days to respond once an offer is made under this facility. In general terms, it allows HMRC to recover tax and issue penalties for evasion dating back 20 years.

HMRC may still pursue a criminal investigation if you fail to make a complete, accurate and honest disclosure of all the frauds resulting in a loss of tax, duty or payment administered by HMRC. HMRC may also pursue a criminal investigation if you make materially false or misleading statements or present false documents during the investigation.

In some instances, there is no option but for HMRC Fraud Investigation to conduct a criminal investigation. These circumstances are as follows:

• When a fraud is particularly serious, such as those with large losses;
• When HMRC want to send a strong deterrent message that reassures the majority that the same tax rules apply to everyone;
• When their civil powers aren’t enough to uncover the truth or recover the tax lost, which can include tackling organised criminals.

What are their powers in a criminal investigation?

As a directorate of HMRC, the Fraud Investigation Service are able to use the following powers if they suspect criminal conduct in tax-related offences:

• Apply for orders requiring information to be produced – production orders;
• Apply for and execute search warrants;
• Make arrests;
• Search suspects and premises following arrest;
• Recover criminal assets through Proceeds of Crime Act 2002.

For serious tax crime, the Fraud Investigation Service can implement intrusive surveillance power, but these powers must be justified and assessed to ensure they adhere to the principles of necessity and proportionality derived from the European Convention on Human Rights (ECHR) and embedded in RIPA 2000.

HMRC’s role in a criminal investigation is to collect evidence to support a prosecution. Once this has concluded, the ultimate decision on whether to pursue a prosecution falls to the Crown Prosecution service.

This blog was co-authored by Olivia Gregson and Evan Wright.