Tax Investigations

In 2010, the UK’s HM Treasury, influenced by the Public Accounts Committee, decided that HM Revenue and Customs (HMRC) would allocate £900 million to address tax avoidance, evasion, and fraud issues. This initiative included a significant increase in criminal prosecutions to serve as a deterrent.

HMRC employs a dual approach in handling suspected fraud: criminal investigation and a civil procedure known as Code of Practice 9 (COP 9). This strategy has led to a noticeable uptick in both approaches over recent years.

Code of Practice 9

COP 9 involves informing individuals of suspected fraud without detailing the nature or basis of the suspicion. They are then encouraged to admit their deliberate misconduct within 60 days in exchange for HMRC refraining from criminal proceedings against that specific conduct. However, they may still face criminal investigation for any undisclosed, deliberate tax irregularities.

This procedure has been in place since 1944, facing occasional legal challenges. The practice has been viewed as controversial for several reasons. Firstly, it is seen as an unethical inducement to confess to fraud, which would typically be illegal in other contexts, such as police interrogations. Secondly, it potentially violates the rights of individuals under European Convention law, who are entitled to detailed information about accusations against them. Thirdly, as there is a potential for prosecution, individuals should theoretically receive a caution under the Police and Criminal Evidence Act 1984, informing them of their right to silence, which is not currently practised.

Receiving a COP 9 notice is highly stressful, and while many want to challenge its legality, especially when reasonable grounds for suspecting tax fraud are lacking, they often choose not to do so due to the even more daunting prospect of a criminal investigation.

Our firm has extensive experience guiding clients through COP 9, often collaborating with renowned accountancy firms. We aim to provide realistic, practical, and legally sound advice to navigate this challenging process and achieve the best possible outcome.

HM Revenue and Customs Inquiries 

Regarding criminal inquiries and prosecutions, HM Revenue and Customs (HMRC) reserves its criminal investigation powers for cases requiring a strong deterrent message or where the behaviour demands a criminal response. Our criminal defence expertise in these prosecutions is highly regarded. We have a longstanding record of successfully defending clients in HMRC prosecutions, encompassing all levels of our firm.

HMRC’s “No Safe Havens” strategy against offshore tax evasion indicates a growing inclination to investigate the use of foreign jurisdictions for tax evasion, including gathering evidence internationally (e.g., through the Common Reporting Standard, adopted by over 90 countries). We have participated in prominent tax investigations and litigation cases.

There is a clear distinction between lawful tax planning/avoidance and illegal tax evasion. Some believe HMRC has recently blurred this line in its anti-tax avoidance efforts by targeting promoters and participants of alleged tax avoidance schemes and occasionally disregarding the legal tax framework.

Our attorneys, experienced in tax avoidance litigation and criminal fraud, are uniquely qualified to represent clients, drawing on their diverse expertise.

UK Tax Enforcement Services

The UK Government is intensifying its focus on tackling illegal tax activities like avoidance, evasion, and fraud. The HM Revenue & Customs (HMRC) has recently revealed that it is actively scrutinising the tax dealings of numerous large corporations. HMRC adopts a dual approach in addressing suspected fraud: a civil inquiry inviting individuals to reveal the actions causing their tax irregularities or a criminal investigation aimed at sending a strong warning when criminal penalties are deemed necessary. 

Moreover, introducing the Corporate Criminal Offense under the Criminal Finances Act 2017 brings a new challenge. This law holds companies accountable if they do not prevent associates from facilitating tax evasion. However, companies can defend themselves by having effective Prevention Procedures to stop such facilitation of tax evasion. Consequently, evaluating risks associated with the new “failure to prevent” legislation and assessing whether current procedures mitigate these risks is crucial.

Legal Defence in Tax Investigations

Our goal is to promote the resolution of HMRC investigations in a non-confrontational manner. However, in situations where criminal investigation and prosecution are inevitable, our expertise as criminal litigators equips us to offer unparalleled guidance to our clients, ensuring the formulation of the most robust defence possible.

Additionally, we provide counsel on identifying risks associated with tax evasion and aid in creating and evaluating policies and procedures. This prevents anyone linked to the company from engaging in activities that facilitate tax evasion, thereby contravening the new corporate criminal offence regulations.

Our teams’ comprehensive background in numerous accounting specialisations makes us ideal for defence in tax investigation cases.