A Look at HMRC's Criminal Investigatory tools

By Nicola O'Connor

01-2020

HMRC have various powers at their disposal which they can use to gather evidence during an investigation. HMRC officers have similar powers to that of the police under the Police and Criminal Evidence Act 1984 (PACE) to arrest individuals suspected of serious criminal tax offences and search premises.

HMRC, in addition to the National Crime Agency have a powerful investigative tool delegated to them for uncovering material relevant to an enquiry under the Serious Organised Crime and Police Act 2005 (SOCPA). The Act creates a number of investigation powers which include compelling witnesses to answer questions or provide information and documents. Offences such as cheating the public revenue, fraudulent evasion of duty and VAT offences are qualifying offences under the Act. Failure to provide information or providing false or misleading information is punishable by imprisonment under the Act.

Beware the company you keep

You may not be suspected of any wrongdoing but never the less can be compelled to provide information, documents and communication which are in your possession under a s 62 SOCPA disclosure notice. Being on the receiving end of such a notice sent by HMRC is a stressful experience and can often come as a shock.

If you are not able to comply because you do not have the documents required, you may be required to state, to the best of your knowledge and belief, where those documents are.

Disclosure Notices

Under s 62 SOCPA a disclosure notice can be issued if it appears that there are reasonable grounds for suspecting that a relevant offence has been committed and the following applies:

• that any person has information (whether or not contained in a document) which relates to a matter relevant to the investigation of that offence; and
• that there are reasonable grounds for believing that information which may be provided by that person in compliance with a disclosure notice is likely to be of substantial value (whether or not by itself) to that investigation.

Examples of relevant offences for these purposes include offences such as cheating the public revenue, any offence under sections 45 or 46 of the Criminal Finances Act 2017 (failure to prevent the facilitation of UK tax evasion offences or foreign tax evasion offences) and fraudulent evasion of duty.

A person who fails without reasonable excuse to comply with a requirement under the notice or provides false or misleading information commits an offence under s 67(1) of the Act. A conviction for failing to comply can result in fines or being imprisoned for up to two years.

Information that is privileged

There are some restrictions under s 64 of the Act on the information you can be required to provide.
A person may not be required under section 62 or 63 of the Act —

• to answer any privileged question;
• to provide any privileged information;, or
• to produce any privileged document.

There are two types of legal privilege, legal advice privilege and litigation privilege. It is important to obtain legal advice about what documents and information you hold that may attract legal privilege to ensure that you comply with the order and do not disclose privileged material.

Search Warrants and Dawn Raids

The majority of HMRC raids are likely to be conducted subject to PACE, particularly if individuals have been arrested. PACE allows for HMRC officers of equivalent rank as police to search premises to tackle tax offences. It is understood that HMRC have around 1,500 officers authorised to carry out arrests in relation to tax offences only. S 18 PACE allows HMRC officers to search any addresses occupied or controlled by a person under arrest for an indictable offence. S 32 allows HMRC officers to enter and search any premises for evidence relating to an alleged offence, where a person has been arrested or where they were physically before they were arrested for an indictable offence.

S8 PACE allows HMRC officers to apply to a Justice of the Peace for a search warrant in cases whereby they believe a serious indictable tax offence has been committed. A warrant will be issued if there are reasonable grounds for believing that there is material on the premises which is likely to be of substantial value to the investigation.

S 66 SOCPA allows an application to be made before magistrates for a search warrant. An application can be made if documents have not been provided following a disclosure notice being issued under s 62 or it is thought that the giving of the notice might prejudice the investigation in some way.

Interview Under SOCPA

Under the SOCPA provisions there is a legal requirement for you to provide information. You cannot therefore as is the case in interviews conducted under the PACE remain silent and refuse to answer questions.

There is no requirement for HMRC or other agencies to wait for a solicitor to be present or even to allow a solicitor into the interview room. However, often solicitors are allowed to attend the interview.

Let Us Take the Strain

If you have received a disclosure notice from HMRC it is important that you obtain legal advice as quickly as possible. It is important to understand the scope of the notice. This might include but is not limited to emails, notes, correspondence and/or documents.

The notice allows HMRC to require you to answer any questions either by responding to a series of questions on paper or in interview.

Often large volumes of documents are demanded under the notices. It can take some time to sift through material and establish what is relevant and what may be covered by privilege.

HMRC regularly request that you produce emails and evidence of other communication between relevant parties. This can be a daunting and time-consuming exercise and not something that you will want to undertake alone. We are used to dealing with large volumes of emails and documents. We can assist in identifying and collating documents required and advise you as to the relevance of the documents in your possession.

We can also assist in negotiating a reasonable timeframe with HMRC in which to reply. Often, we find that the initial notice received contains a requirement to respond within a timeframe that is unrealistic.

Advice from experts in tax crime

You will want to take confidential advice about the documents you have uncovered even if you are not the subject of the investigation. Sometimes clients have concerns about potentially exposing themselves to investigation by HMRC as a result of disclosing documents required under such a notice.
It is important to have access to the right advice. Our tax disputes and investigation team can advise in relation to complex tax crime issues in addition to offering valuable experience of defending clients under criminal investigation by HMRC.