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What is HMRC’s Fraud Investigation Service?

HMRC’s Fraud Investigation Service, also known as FIS, is HMRC’s elite division that focuses predominantly on investigating suspected tax fraud/evasion. The team was established in 2015 when HMRC combined its Criminal Investigations Unit and the Special Investigations Unit, and teams under the FIS umbrella continue to deal with both criminal and civil cases.

Due to the high value nature of its work, FIS boasts a high compliance yield, citing £4,066,000,000 for tax year 2022/23, although this will include an estimate of future tax losses that have been prevented by correcting the behaviour of those under investigation.

HMRC’s FIS team

FIS officers are some of the most experienced and well-trained officers in HMRC. They should not be underestimated. If you’ve received a letter from HMRC FIS, we strongly encourage you to speak to our tax investigation specialists today.

There are FIS teams in different regions of the country, and although they follow the same broad framework, they operate independently from each other. Often, they will take different approaches to similar issues, and with differing degrees of flexibility.

Criminal investigations

Criminal investigations tend to be costly and time consuming for HMRC and are generally reserved for the most serious of cases, or cases where HMRC considers it needs to make an example to deter other taxpayers from taking similar actions or encourage those that have already done so to come forward and correct their position.

In tax year 2022/23, HMRC achieved just 218 convictions (compared with 545 completed COP8 investigations and 661 COP9).

Civil investigations

The majority of cases dealt with by FIS are civil investigations, through either Code of Practice 8 (COP8) or Code of Practice 9 (COP9). COP8 is generally used where HMRC suspects an individual has underpaid tax through complex arrangements or structures but does not currently suspect it was deliberate (fraudulent).

Should HMRC suspect fraudulent behaviour, either at the outset, or during the course of another investigation, its guidelines state that an offer to proceed under COP9 should be made (assuming prosecution is not to be pursued). HMRC defines fraud as any deliberate omission, concealment or misinterpretation of information, or the false or deceptive presentation of information or circumstances in order to gain a tax advantage.

In practice this will predominantly include deliberately submitting false returns, deliberately failing to submit returns at all, falsely claiming repayments or reliefs and also smuggling.

However, we are aware of cases that have continued under COP8 even though deliberate behaviour is suspected (and in some cases has been acknowledged). We understand this is a result of HMRC officer’s desire to lead the investigation themselves, rather than relying on a tax professional engaged by the taxpayer to make a disclosure of all irregularities.

This approach prevents the taxpayer from benefiting from immunity from prosecution (available under COP9 but not COP8), and we would advise any individual who has deliberately and knowingly failed to pay tax, or reclaimed tax to which they were not entitled, to apply for and make a disclosure under COP9.

HMRC FIS has requested a meeting, what should I do?

While HMRC cannot force attendance at a meeting (unless there is a criminal investigation, and the meeting is in fact an interview under caution), officers are becoming increasingly insistent a meeting be held in certain cases and will threaten increased penalties for a lack of cooperation where a meeting is not held.

In theory, HMRC cannot impose higher penalties where a meeting has not been held, provided a full disclosure is made, and the taxpayer has cooperated throughout by ‘telling, helping and giving’. However, HMRC has recently updated the terms of its Contractual Disclosure Facility (CDF) under COP9 such that taxpayers who accept HMRC’s offer of the CDF are expected to attend a meeting should HMRC wish to have one.

If there is a particular reason why a meeting is not appropriate, such as the health of the taxpayer, or the simplicity of the case, then HMRC may agree a meeting is not necessary, but care should be taken to ensure there will be no adverse consequences for the taxpayer.

If a meeting is necessary, then specialist advisers should also attend. Following the meeting, HMRC should provide meeting notes and these should be carefully reviewed, and any errors or misunderstandings brought to HMRC’s attention as soon as possible to avoid later problems.

How we can help

Our Tax Investigations and Dispute Resolution team includes former HMRC FIS officers, and deals with a high number of FIS investigations, meaning we understand the team’s powers and operating procedures. This leads to a more efficient handling of such investigations and minimises unnecessary tax, interest and penalties. In the most serious cases, we can help individuals avoid criminal investigation and the confiscation of assets.

By choosing to get specialist advice from Buzzacott, we will:

• Carry out a comprehensive review of your tax affairs, working with you and your professional adviser (If applicable), to ensure we have a full understanding of the issues and risks you're facing;

• Prepare a strategy going forward to minimise your potential exposure to unnecessary tax, interest and penalties;

• Should a disclosure be necessary, we will present this to HMRC to ensure that you're treated fairly and proportionately;

• Seek to ensure HMRC’s check does not expand unnecessarily;

• Aim to fast track your investigation to resolution and closure of all issues to your satisfaction at minimum cost and disruption to you.