When does an HMRC investigation turn into a criminal investigation?

It’s a question we’re asked every day: ‘Can HMRC send me to prison?’

Even if you’ve never pondered the question yourself, if you’re a business owner or self-employed, chances are you’re familiar with receiving some kind of document from HMRC – as well as the sense of panic such documents can bring.

But if you believe you could be under investigation for serious tax fraud or evasion, it’s well-advised to act fast. Ask for help.

Still, in the meantime, you might be wanting to get a few things in check. You might be wondering what your rights our or how an investigation into tax evasion proceeds. Either way, today we’ve got you covered.

So let’s break this topic down and give you peace of mind.

How HMRC Approaches Criminal Investigation.

First and foremost, there’s good news. Even if you are found at fault for not paying the correct amount of tax, a criminal investigation isn’t necessarily the most common route.

Nor is prison the most common outcome. Not by a long shot.

Instead, before launching a criminal investigation, HMRC will first look at the suspected offences to decide whether they are heinous enough to warrant an investigation from the law.

Here’s what HMRC has to say: ‘HMRC’s aim is to secure the highest level of compliance with the law… [but] criminal investigation will be reserved for cases where HMRC needs to send a strong deterrent message, or where the conduct involved is such that only a criminal sanction is appropriate.’

So what does this mean for you if you’re facing an allegation of serious tax fraud or evasion?

It means that whilst HMRC reserves the right to conduct a criminal investigation into any of its cases, ultimately, most investigations just don’t turn out this way.

What’s more likely for you? If you talk to us, talk to your accountant and remain compliant with HMRC, you’ll be able to forget about the daunting prospect of a prison sentence.

Which is more good news, right?

But what kind of cases do HMRC consider criminal?

There are a few circumstances where HMRC will usually opt for pursuing a criminal investigation, and below is a non-exhaustive list of examples. Nevertheless, it’s worth pointing out here that there is a chance HMRC will prosecute on any type of case. It’s just less likely than the examples below.

Examples of Commonly Prosecuted Tax Fraud Cases

  1. Organised crime defrauding the tax system.
  2. Where the individual under investigation holds a position of trust or responsibility – an MP or councillor, for example.
  3. Where deliberate concealment, deception, conspiracy or corruption is suspected.
  4. Repeat offenders.
  5. Where individuals under investigation have been threatening or have assaulted HMRC officers.
  6. Where there a suspected link to wider criminality.

Still, even if you fit none of the criteria above, it’s always worth remembering: though unlikely, HMRC may choose to pursue a criminal investigation. But if you are under investigation already? So long as you are compliant and offer up all evidence and information when asked, HMRC will be a lot more lenient.

And chances are, you’ll just be issued a fine.

Which is a heck of a lot more appealing than a prison sentence.

So what can I take away from this if I’m facing a serious tax fraud investigation?

The likelihood of facing a criminal investigation as a business owner diminishes greatly if you take into account a number of contextual facts.

Say for instance you own a restaurant and there’s been a mistake in your VAT accounting. The chances of being prosecuted by the law is highly unlikely, versus an individual who fraudulently claims they are a solicitor to con people out of money.

If a malicious crime has been committed or the individual under investigation is a repeat offender, it’s sensible to expect the worst.

But if you’re a business owner who’s simply miscalculated your taxes, or even missed deadlines or made mistakes due to other stresses in your life, the chances are you’ll be let off without a criminal record.

If you’re compliant, polite, and helpful with HMRC’s requests, of course.

Ultimately though – and as we always say – it pays to be prepared, whatever your circumstances. So if you’re facing the prospect of a serious tax fraud investigation?

Get in touch. We can help. We can give you peace of mind.

One thought on “Can HMRC Prosecute?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s