Civil Evasion Investigations

a. Code of practice COP 8
b. Code of practice COP 9
c. Code of practice COP 11

a, b and c are the usual procedures for the HMRC to investigate and usually does not involve criminal prosecution.

Under section 36 of the Taxes Management Act 1970 the revenue are allowed to go back 20 years with their investigations.Many people are under the false impression that HMRC can only go back 6 years.

To quote:

“An assessment on any person for the purpose of making good to the Crown a loss of income tax or capital gains tax attributable to his fraudulent or negligent conduct or the fraudulent or negligent conduct of someone acting on his behalf may be made at any time (not later than 20 years after the 31st January next following the year of assessment to which it relates)”

The penalty can be as much as 100% of the tax claimed and HMRC do pursue individuals personally for such penalties. The effect of an investigation of this nature on a business and the owners can be hugely disruptive and our role is to act on behalf of the tax payer by:

• Negotiating and agreeing the amount of income tax or VAT involved penalties and interest.
• Conducting appeals against income tax and VAT assessments and penalties to the General and Special Commissioners of the Inland Revenue and/or the Value Added Tax Tribunals.

Criminal Prosecutions

Section 144 of the Finance Act 2000

Make no mistake the Revenue if they proceed under this section want you to go to prision.

Since Lord Grabiner QC was asked by the Chancellor of the Exchequer in November 1999 to look into the black economy his report brought about regulations added to the 2000 finance bill which essentially became the basis for a new criminal procedure by the revenue.

Part of the preliminary report said that there were two few prosecutions and he felt that the revenue only prosecuted larger cases and was willing to come to a settlement with what it regards as smaller cases.

The actual recommendation at the time of the report at 7.13 reads:

“I recommend creating a specific statutory offence of knowingly failing to meet basic tax obligations which could be tried in a magistrates court rather than a crown court this could be based on offences of fraudulent evasion that exists for VAT and national insurance contributions”

Grabiner then went on to discuss the possibility of joint prosecutions following a joint investigation and now with the joining up of HM Customs and the Inland Revenue into the HM Revenue & Customs service that has actually become reality.

HMRC have become active in recent years in investigation and prosecuting smaller cases.

We have acted as witnesses in a number of cases and have been able to assist solicitors by bringing our expertise and experience to bear by:

• Providing expert advice on technical issues
• Providing expert advice on evidential issues, for example where a carousel fraud is alleged
• Identifying and commenting upon additional disclosure material
• Examining and challenging the alleged quantum
• Preparing expert witness reports
• Giving evidence at the trial

Litigation

Our experience and expertise in fraud and HMRC tax investigation regulations and procedures has proved invaluable in a number of cases in which we have been instructed as experts to challenge a demand or claim made by HMRC against innocent parties as a result of the fraudulent or illegal diversion of duty free goods by others.