Tax Offences and Serious Investigations

HMRC may start a COP8 investigation where they consider deliberate errors have resulted in a significant loss of tax.  Although COP8 investigations are handled by HMRC’s Fraud Investigation Service team, they are not suitable for matters involving suspected tax fraud and are instead often used for cases of aggressive tax avoidance or marketed arrangements.

HMRC may start a COP9 investigation where they suspect tax fraud has occurred (or where individual taxpayers want to own up to tax fraud voluntarily).  Under COP9, the relevant individuals are offered the opportunity to make a full disclosure of any fraudulent behaviour through the associated Contractual Disclosure Facility (or CDF) and pay any tax due, in return for which HMRC will agree not to start a criminal investigation with a view to prosecution.

Yes. Generally, English law allows corporate entities to be found guilty of tax fraud offences where dishonesty can be attributed to the ‘directing mind and will’ of the business (i.e., members of senior management).  

Although it has traditionally been difficult in practice for prosecutors to meet the ‘directing mind and will’ test, the Criminal Finances Act 2017 (CFA) established two new offences related to the facilitation of evasion of UK and foreign tax.  These are strict liability offences, meaning there is no requirement to prove any element of dishonesty - making it much easier for corporate entities to be prosecuted in relation to tax evasion/fraud.  

Although corporate entities clearly cannot face prison sentences, a successful prosecution under tax offences could result in unlimited financial penalties (as well as loss of reputation and any other applicable regulatory approvals).

Under their criminal investigatory powers, HMRC can conduct searches of business and personal premises if they have an appropriate search warrant.  These types of searches are known as ‘dawn raids’ because they usually start in the early hours of the morning.

Dawn raids will often represent the first step in a protracted criminal investigation conducted by HMRC.  They can be highly disruptive and intimidating to individuals present, and commonly raise complex issues of law (such as whether documents are covered by legal privilege).  If you or your business become the subject of a dawn raid, it is therefore very important to seek appropriate professional advice as soon as possible once officers arrive on site.