HMRC will consider a criminal investigation from the outset where they suspect that a significant amount of revenue has been lost by way of fraud or another form of deliberate conduct. They will also conduct a criminal investigation, rather than a civil inquiry, when they want to send out a strong deterrent message or where they regard the alleged conduct to be so serious that it is necessary.
Tax investigations COP9 – Criminal investigations are likely to occur when HMRC suspects:
Deliberate filing of inaccurate Tax Returns or VAT Returns including income tax evasion;
Deliberate failure to file Tax Returns or VAT Returns;
Use of false or forged documents;
Concealment, deception, or corruption;
Failure to provide full and accurate disclosure in an investigation or settlement;
Conspiracy with others to evade tax or duty;
Involvement of a professional (tax adviser, accountant or lawyer), particularly if they advise or act for taxpayers (as they will be viewed as ‘a source of infection’);
VAT Missing Trader Intra-Community (MTIC) or carousel fraud;
VAT ‘bogus’ or ‘hijacked’ registration repayment fraud;
Breach of import or export prohibitions or restrictions (‘sanctions busting’);
A Contractual Disclosure Facility (CDF) has been offered under Code of Practice 9 (COP9) but the taxpayer has chosen to reject/ignore the offer.
HMRC has strong investigatory powers, with the ability to carry out dawn raids (search and seizure) at homes and business premises, which is often accompanied by the arrest of the taxpayer. Routinely, HMRC will also covertly obtain warrants and court orders to require banks, advisers and even accountants to provide records and financial information about a taxpayer.
HMRC also has the power to apply without notice for a Restraint Order under the Proceeds of Crime Act (POCA) to freeze all the assets of the person being investigated until the outcome of the investigation and any subsequent court proceedings.
Tax investigations COP9 – In recent years, HMRC has brought hundreds of tax fraud prosecutions resulting in severe prison sentences for those convicted. HMRC tough stance has been demonstrated by cases involving relatively minor tax evasion, VAT evasion, and duty evasion (tobacco and alcohol smuggling, and fuel duty).
Following a successful criminal prosecution, HMRC will always consider seeking a Confiscation Order under the Proceeds of Crime Act (POCA) to recoup the benefits of the taxpayers criminality. A confiscation order is backed up by a default sentence of imprisonment should the tax payer not pay the confiscation order within a set period (in addition to the original sentence).
HMRC have created a Fraud Investigation Service which will actively maintain a high rate of investigations and prosecutions.
Further UK Gov information can be found here
“The Commissioners of HMRC reserve complete discretion to pursue a criminal investigation with a view to prosecution where they consider it necessary and appropriate.
In cases where a criminal investigation is not started, the Commissioners may decide to investigate using the Code of Practice 9 (COP9) investigation of fraud procedure.
Under the investigation of fraud procedure, the recipient of COP9 is given the opportunity to make a complete and accurate disclosure of all their deliberate and non-deliberate conduct that has led to irregularities in their tax affairs. Where HMRC suspects that the recipient has failed to make a full disclosure of all irregularities, the
Commissioners reserve the right to start a criminal investigation with a view to prosecution.
The term ‘deliberate conduct’ means that the recipient knew that an entry or entries included in a tax return and/or accounts were wrong, but the recipient submitted it/them anyway, or that the recipient knew that a liability to tax existed but chose not to tell HMRC at the right time.
In the course of the COP9 tax investigation, if the recipient makes materially false or misleading statements, or provides materially false documents, the Commissioners reserve the right to start a criminal investigation into that conduct as a separate criminal offence.”
The Contractual Disclosure Facility (CDF) offers you the chance to disclose any loss of tax that has been brought about by your deliberate conduct. Remember this offer expires 60 days after you receive our letter making the offer.
You will make a full disclosure of all your tax irregularities under the terms of the CDF. To comply with your part of the contract you need to complete a valid Outline Disclosure of the deliberate conduct that brought about a loss of tax, a certified statement that you have made a full, complete and accurate disclosure of all tax irregularities together with certified statements of your assets and liabilities, and of all bank accounts and credit cards you have operated.
This is the only way that you can be certain that HMRC will not carry out a criminal investigation into the tax frauds they suspect. In exchange for your full disclosure of all
irregularities HMRC will not pursue a criminal investigation into the conduct you disclose.
To comply with the terms of the contract, you will be admitting that tax has been lost because of your deliberate conduct. This means that HMRC may be able to seek recovery of the tax, interest and associated penalties you may have evaded for as far back as 20 years.
If you enter into a CDF contract HMRC expect you to co-operate fully with them. Full co-operation will ensure that you achieve the greatest possible reductions for any penalty that may be due. More information on our penalty regimes is available on the HMRC website.
A COP9 investigation is a type of investigation conducted by HMRC's Compliance, Operational Policy and Strategy (COPS) team. The purpose of these investigations is to identify and tackle serious and complex cases of suspected tax fraud or evasion. Investigations may be conducted into both individuals and businesses.
Find out more about how Matrix Forensic can help with tax investigations under COP9 by sending us an enquiry.