HMRC Criminal Investigation: What Happens and What to Do

Most HMRC fraud investigations are civil. However, a small number are criminal, and those are the ones that end in arrest, search warrants and the Crown Court. The first thing to establish, before anything else, is which of the two you are actually in, because the process, the risks and the right adviser are completely different.

This guide explains what a HMRC criminal investigation involves and what to do if you are in one.

The short version: HMRC deals with most suspected tax fraud civilly, under Code of Practice 9 and the Contractual Disclosure Facility, which offers immunity from prosecution for tax offences in return for a complete and honest disclosure. It reserves criminal investigation for cases it considers serious enough to prosecute.

If you have received a COP9 letter, you are in the civil process and need a specialist tax investigations adviser. If you have been arrested, had premises searched under warrant, or been asked to attend an interview under caution, you are in the criminal process and need a criminal defence solicitor.

Civil or criminal? How to tell which investigation you are in

This is an important question, as civil and criminal processes are very different:

You are probably in the civil process if: you have received a Code of Practice 9 letter offering you the Contractual Disclosure Facility, or HMRC has opened an enquiry into a return, asked for records, or told you it believes additional tax is due. The civil route is about recovering tax, interest and penalties. It is handled by accountants and specialist tax investigations advisers, and JD Spicer Zeb does not provide legal advice in relation to these types of matters.

You are in the criminal process if: officers have executed a search warrant at your home or business, you have been arrested, or you have been invited to a voluntary interview under caution. A criminal investigation is about prosecution, not tax recovery, and it is conducted with a view to a charge.

The two are not sealed off from each other. HMRC can move a case from the civil route into the criminal one, most obviously where someone accepts the CDF and then makes an incomplete or dishonest disclosure, or where materially false statements or documents are provided during the investigation. That is precisely why what you say at the outset matters so much.

HMRC publishes its criminal investigation policy, which sets out the circumstances in which it will consider prosecuting rather than settling.

How do you know if HMRC is investigating you?

For a civil enquiry, you will usually be told: a letter arrives asking for information about a return or a period.

A criminal investigation often announces itself very differently. Many people first learn of it when officers arrive with a search warrant, when they are arrested, or when they receive a request to attend a voluntary interview under caution. The word "voluntary" is misleading: a voluntary interview under caution is a criminal interview, the caution is the same one used by the police, and what you say is evidence.

HMRC also works covertly. Test purchases, observation of how busy a business actually is, and comparison of that against declared figures are routine. Silence from HMRC does not mean nothing is happening.

What happens during an HMRC criminal investigation

The sequence is broadly the same as any serious criminal investigation, run by HMRC's Fraud Investigation Service rather than the police.

1. Information gathering, including production orders, third-party data and material obtained covertly.
2. Search warrants. Officers may enter and search premises and seize devices, records and cash. Dawn raids are used by HMRC as they are by the Serious Fraud Office.
3. Arrest or voluntary interview under caution. This is the pivotal stage. You are entitled to free independent legal advice, and to have a solicitor present, whether you are under arrest or attending voluntarily.
4. Released under investigation or on bail while material, particularly digital material, is examined. These cases routinely take a year or more.
5. Criminal charging decision, referred to the Crown Prosecution Service.
6. Crown Court proceedings, and frequently parallel confiscation proceedings under the Proceeds of Crime Act.

Confiscation is often the part clients least expect and which costs them most. We deal with it separately under cash and asset forfeiture.

What offences does HMRC prosecute?

Cheating the public revenue is the offence HMRC reserves for the most serious cases. It is triable only on indictment, it carries a maximum of life imprisonment, and unlike the Fraud Act offences, it does not require proof of a false representation: any dishonest conduct that deprives the revenue of money it is entitled to can amount to it.

What sentence could you face?

Sentencing follows the Sentencing Council's revenue fraud guidelines, which work from the amount of the loss and your culpability. For cheating the public revenue, the guideline's offence range runs to well over a decade of custody in the most serious cases, with the statutory maximum remaining life.

Repaying the tax does not end a criminal case, though genuine and early repayment is relevant to mitigation and to confiscation.

What to do if HMRC contacts you about a criminal matter

1. Do not attend an interview under caution without a solicitor. Representation at that interview is free regardless of your means, and there is no advantage in going alone.
2. Do not put anything in writing to HMRC first. Explanations offered informally before advice are the most common source of later difficulty, because they are evidence and they fix your account.
3. Do not destroy or tidy anything. Deleting material after contact from HMRC creates a second, easier offence to prove than the first.
4. Get the right adviser for the right process. An accountant is the right person for a COP9 disclosure. A criminal defence solicitor is the right person once the matter is criminal. Where both are running, they need to work together, and privilege needs to be handled carefully.
5. Engage early. Pre-charge representations to HMRC or the CPS on the evidential and public interest tests are made before a charging decision, not after it, and that window is where cases are most often resolved.

Been arrested, raided or asked to attend an interview under caution by HMRC? Speak to us before you say anything. The first conversation costs nothing, representation at an interview under caution is free regardless of means, and we answer the phone 24 hours a day.

Our serious fraud team acts in HMRC and SFO prosecutions, including VAT fraud, money laundering and COVID and bounce back loan fraud.

Common questions

Does an HMRC investigation always mean prosecution?

No. HMRC deals with most suspected fraud civilly and recovers tax, interest and penalties. Criminal investigation is reserved for cases it considers serious enough to prosecute, and even then, a charge does not automatically follow.

What is Code of Practice 9?

It is HMRC's civil investigation of fraud procedure. It offers the Contractual Disclosure Facility, under which you make a complete and accurate disclosure of tax fraud and HMRC agrees not to prosecute you for those tax offences. It is a civil process handled by tax specialists, not criminal defence solicitors.

Can HMRC arrest you?

Yes. HMRC criminal investigators have powers of arrest and can obtain and execute search warrants at homes and business premises.

What is a voluntary interview under caution?

A criminal interview conducted without arrest. You are cautioned, your answers are evidence, and you are entitled to free legal representation. Attending voluntarily does not make it informal.

How long does an HMRC criminal investigation take?

Frequently a year or more, particularly where devices and business records require forensic examination. You may be on bail or released under investigation throughout.

Will repaying the tax stop a prosecution?

Not by itself in a criminal case. It can be a significant mitigation, and it matters in confiscation, but the decision to prosecute turns on the evidence and the public interest.

Speak to our criminal lawyers today

If you are due to attend the police station for interview for allegations of HMRC fraud, or require any urgent specialist advice, immediate representation, please do not hesitate to get in touch.

Contact us today:

• London Central - Head Office: 020 7624 7771
• West Hampstead Office: 020 7624 7771 
• Manchester Office: 0161 835 1638
• Birmingham Office: 0121 614 3333

Or email: solicitors@jdspicer.co.uk

Alternatively, you can fill out our quick online enquiry form and we will get back to you as soon as possible.

By Umar Zeb, Senior Partner and Head of Private Client Crime, a criminal specialist with over 30 years' experience in serious and complex fraud. This guide states the law and practice of England and Wales. It is general information, not advice on your case.