HMRC’s Criminal Investigation Policy states that it has complete discretion to conduct a criminal tax investigation in any case, particularly where it feels it needs to send a “strong deterrent message” or where it feels the case is so serious that only a criminal sanction is appropriate. However, not every criminal tax investigation results in a successful criminal prosecution. Historically, HMRC’s policy has mainly been to deal with suspected tax fraud/evasion via its Code of Practice 9 (COP9) – Contractual Disclosure Facility procedure.
Where a taxpayer under a COP9 investigation rejects HMRC’s offer of the Contractual Disclosure Facility, HMRC reserves the right to reconsider the case as a criminal tax investigation. Where a taxpayer under a COP9 investigation accepts the Contractual Disclosure Facility offer, but makes materially false disclosures then HMRC will often feel it has no option but to criminally investigate.
Criminal tax investigation cases are conducted by HMRC’s Criminal Investigation Directorate, who seeks to secure evidence of serious tax fraud by way of Raids & Search Operations. In 2011, HMRC was set a target to increase prosecutions for tax evasion from 165 in 2010/11 to 1,165 by 2014/15. HMRC achieved this by focusing on lower complexity cases, a number of which were lower than £50,000 of potential lost revenue. Cases that might previously have been dealt with under a COP9 investigation will now face an increased likelihood of being criminally investigated.