Cases for Prosecution

In most cases the taxpayer will not be prosecuted.  Nevertheless, there are some cases where prosecution will always be considered and criminal proceedings will be taken unless the evidence is considered by the Board’s solicitor not to be up to the standard required by the criminal courts.  This will be the case:-

  • Where the offence falls into one of the main prosecution areas set out in HMRC’s prosecution policy (see below).
  • The taxpayer does not make a complete disclosure and is guilty of deceitful behaviour during the investigation and preparation of the report.

It should be noted that HMRC now give more publicity to prosecution cases.  They have stated that they see their policy of selective prosecution cases.  They have stated that they see their policy of selective prosecution as an important part of their strategy to deter fraud and evasion.  As part of the wider publicity for this strategy, details of prosecutions are regularly published in both press releases and Tax Bulletin.

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Criminal Proceedings

Where the Revenue and Customs Prosecution Office decides to institute criminal proceedings (by way of laying information before a magistrate), the first the taxpayer will know of this is the receipt of a summons to appear in a magistrate’s court. In some cases, particularly where it is considered that the defendant is likely to abscond, an arrest warrant will be applied for and, if granted, the taxpayer will be arrested by a police constable. What the taxpayer is charged with depends on precisely what criminal offences he is alleged to have committed and this, in turn, governs whether he will be tried summarily in a magistrates court or, on indictment, in a crown court, usual charges are cheating the public revenue (common law) or under the Thefts Act, but can include charges of conspiracy, forgery, perjury, etc, as appropriate.

It was, for very many years, the Board’s policy that if criminal proceedings were brought against a person then, whether the person was convicted or acquitted, the Board would not also seek a civil monetary penalty (under the Taxes Acts). On 10th May 1988 the Bard issued a new statement of practice, SP 2/88, explaining when it would and would not seek a civil monetary penalty in cases where criminal proceedings have been instituted. SP 2/88 was superseded by Codes of Practice 8 and 9 and withdrawn by Tax Bulletin, Issue 81, when it was superseded by the HMRC Criminal Investigation Policy statement.

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Entry and Search

In a few, very rare cases, HMRC invoke their powers under TMA 1970, s. 20C to enter premises, by force if necessary, and:-

  • Seize and remove any things whatsoever found there which he has reasonable cause to believe may be required as evidence for the purposes of proceedings in respect of such an offence as is mentioned in subsection (1) above (i.e. serious fraud in connection with or related to tax) and
  • Search or cause to be searched any person found on the premises whom he has reasonable cause to believe to be in possession of any such things.

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Merger of Inland Revenue and Customs and Excise

The Inland Revenue and Customs and Excise have been merged into a new department called Her Majesties Revenue and Customs (HMRC).  The Commissioners for Revenue and Customs Act 2005 provides for the appointment of Commissioners to Commissioners of Customs and Excise.  The Act also established a new Revenue and Customs Prosecution Office (RCPO) to prosecute HMRC cases in England and Wales.  It is intended that the creation of RCPO will:-

  • Demonstrate the full independence of the prosecutors and ensure that the public can have confidence in their credibility and integrity;
  • Introduce external scrutiny of criminal investigation work;
  • Improve standards and effectiveness; and make the staff of the office, through the Director, accountable to the Attorney General.

Traditionally it has been left to Revenue & Customs officers to decide whether to prefer criminal charges and if so, what charges to prefer and against whom.  Decisions on whether to prosecute have now been handed over entirely to the RCPO who will advise investigators from the earliest possible stage so that the right evidence is collected, the strongest case is built and the right charge is chosen first time.

Since the merger, HMRC have set up a new Criminal Taxes Unit (CTU) which will work with the police, the Serious Organised Crime Agency and the Assets Recovery Agency to identify those who have amassed wealth from crime but have paid little of tax crime, HMRC are considering in more detail how this could be implemented.

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Prosecution Policy

After the merger of the Revenue and Customs, HMRC issued the following statement of their prosecution policy:-

‘HMRC Prosecution Policy statement

Since the formation of HMRC in April 2005, the function of prosecuting HMRC’s criminal casework has been wholly undertaken by the Revenue and Customs Prosecutions Office (RCPO), which is an independent prosecuting authority reporting to the Attorney General.  RCPO will determine which of the cases referred to it by HMRC should proceed to prosecution by applying the tests set out in the Code for Crown prosecutors.

Although HMRC is no longer a prosecuting authority it still has an important role to play in the protection of society from illegal imports of drugs, alcohol and tobacco smuggling and tax fraud.  This still requires it to investigate both under civil and criminal codes, any offences and suspected offences it discovers in these areas.

HMRC Criminal Investigation Policy

HMRC’s aim is to secure the highest level of compliance with the law and regulations governing direct and indirect taxes and other regimes for which they are responsible.  Criminal investigation, with a view to prosecution by the Revenue and Customs Prosecution Office (RCPO) in England and Wales – or the appropriate prosecuting authority in Scotland and Northern Ireland, is an important part of HMRC’s overall enforcement strategy.

It is HMRC’s policy to deal with fraud by use of the cost effective Civil Investigation of Fraud (CIF) procedures, wherever appropriate.  Criminal Investigation will be reserved for cases where HMRC needs to send out a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.

However, HMRC reserves complete discretion to conduct a criminal investigation in any case and to carry out these investigations across a range of offences and in all the areas for which the Commissioners of HMRC have responsibility.

Examples of the kind of circumstances in which HMRC will generally consider commencing a criminal, rather than a civil investigation are:-

  • In cases of organised criminal gangs attacking the tax system or systematic frauds where losses represents a serious threat to the tax base, including conspiracy
  • Where an individual holds a position of trust or responsibility.
  • Where materially false statements are made or materially false or altered document or such reliance or material facts are misrepresented to enhance the credibility of a scheme;
  • Where deliberate concealment, deception, conspiracy or corruption is suspected;
  • In cases involving the use of false or forged documents;
  • In cases involving importation or exportation breaching prohibitions and restrictions;
  • In cases involving money laundering with particular focus on advisors, accountants, solicitors and others acting in a “professional” capacity who provide the means to put tainted money out of reach of the law enforcement;
  • Where the perpetrator has committed previous offences or there is a repeated course of unlawful conduct or previous civil action;
  • In cases involving theft, or the misuse or unlawful destruction of HMRC documents;
  • Where there is evidence of assault on, threats to, or the impersonation of HMRC officials;
  • Where there is a link to suspected wider criminality, whether domestic or international, involving offences not under the administration of HMRC.

When considering whether a case should be investigated under the Civil Investigation of Fraud procedures or is the subject of a criminal investigation, one factor will be whether the taxpayer(s) has made a complete and unprompted disclosure of the offences committed.

However, there are certain fiscal offences where HMRC will not usually adopt the Civil Investigation of Fraud approach.  Examples of these are:-

  • VAT Missing Trader Intra-Community (MTIC) Fraud.
  • VAT “Bogus” registration repayment fraud
  • Organised Tax Credit fraud’

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Strategic Framework for Tackling Criminal Finances

HMRC have published details of their strategic framework for tackling criminal finances. The strategy is summarised below.

‘Background

The criminal finance strategic framework seeks to reinforce the recovery of proceeds of crime as a central tenet of HMRC’s enforcement work and, in accordance with the Government’s drive to improve performance in the field of asset recovery, to make the recovery of criminal finances a priority for HMRC.

This strategy acts as a key lever to promote criminal finance and asset recovery action within other departmental strategies, within which we expect to see increased prominence given to the use of confiscation and cash forfeiture activity and other responses available under the Proceeds of Crime Act (POCA) and other legislation. The publication of this framework document provides a context for operational activity and is a major part of our efforts to improve our performance in deterring criminality and the consequent harm caused. The framework takes account of wider Government objectives and priorities, including the review of asset recovery by the Prime Minister’s Delivery Unit which requires all agencies to raise their game in this area of work. Tackling criminal finances is clearly identified as a priority work area for Enforcement and Compliance areas of HMRC.

The strategy has been drafted in consultation with the Home Office and the Treasury. The Prime Minister’s Delivery Unit’s review of asset recovery found that asset recovery is only making a small dent in the criminal economy and concludes that more needs to be done by all law enforcement agencies to increase the recovery of criminal assets. The criminal finance strategic framework aims to make financial investigation an important aspect of every criminal case and this will assist the Government in achieving tangible results.

HMRC’s strategic framework will ensure that the use of the new powers provided by SOCAP2005 are maximised as emphasised by the Home Secretary, to ensure that criminals are denied the financial gain that motivates criminal activity. HMRC is committed to utilising POCA powers on confiscation, money laundering, cash seizure and investigative techniques wherever appropriate and to ensuring that the principle of financial investigation alongside the investigation of predicate offences applies across all regimes. This framework will ensure this is achieved.

The Framework

In line with the wider Government agenda and other law enforcement agencies, recovering the proceeds of crime is a priority for HMRC’s enforcement and compliance areas. While the framework outlines ways to improve our work in asset recovery in line with other agencies such as ARA, SOCA, Treasury and the Home Office, it does not seek to prescribe how operational business areas should operate. However, it provides a high level framework within which operational areas can design plans and set targets in order to deliver tangible results in line with the objectives of the department.

The objectives of this framework are set out below.

Maximising seizures of cash and other negotiable instruments which result in forfeiture by:-

  • Developing intelligence assessments of cash movements, improving communication and intelligence flows and fully exploiting financial opportunities through the establishment of a National Financial Intelligence Branch.
  • Quality interceptions at the frontier and inland by a workforce equipped with appropriate skills and equipment including detector dogs.
  • Maximising retention of seized cash by ensuring appropriate professional standards are maintained.
  • Debriefing and evaluating cases.
  • Focusing on innovation and sharing of best practice and management information to maximise opportunities for detection and seizure.
  • Developing a performance framework which clearly shows the effectiveness of asset recovery and the contribution to overall delivery of the individual work areas.

Maximising the value of criminal proceeds recovered through confiscation by:-

  • Ensuring that financial investigation with a view to confiscation is a feature of all criminal investigation.
  • Seeking restraint orders at the earliest appropriate stage during investigation.

Using tax laws to tax criminal profits, and civil proceedings to recover criminal assets by:-

  • The HMRC Criminal Taxes Unit working in partnership with other agencies to identify and pursue or refer cases which offer tax intervention opportunities.
  • Referring cases to the Assets Recovery Agency for civil actions.
  • Recycling funds from the Asset Recovery Incentivisation Scheme (ARIS) into new and innovative measures to enhance our attack on criminal activity and related profits.

Identifying opportunities to further undermine criminal financial gains by pursuing money-laundering offences in addition (or as an alternative) to other offences by:-

  • Maximising intelligence flows through our financial intelligence officers located within the Serious Organised Crime Agency.
  • Further developing close relationships with key players in order to drive investigation efforts against targeted money launderers.
  • Taking criminal action against money laundering offences, especially in cases of serious fraud and for those in positions of responsibility.

The Strategic Framework also includes a chapter outlining HMRC’s approach to gaining compliance of Money Service Businesses.

Tackling Criminal Finance work will assist the Department in meeting its public service agreement targets particularly PSA objectives 1 and 3 which require HMRC to improve the extent to which individuals and businesses pay the amount of tax due and receive the credits and payments to which they are entitled as well as strengthening frontier protection against threats to the security, social and economic integrity and environment of the United Kingdom.

The Strategic Framework will facilitate the reduction of the tax gap under PSA objective 1 by mainstreaming and prioritising the recovery of the proceeds of crime. It will also contribute to PSA objective 3 by restricting the extent to which criminal finance is able to enter the UK economy and by restricting the amount of criminal money leaving the UK.

In summary HMRC is committed to supporting and furthering the wider Government agenda of stripping the financial incentive from crime so as to reduce the harm caused by such activity. The criminal finance strategic framework will drive other departmental strategies and provide a structure within which operational plans may be constructed in order to deliver HMRC’s objectives.’

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