As a matter of policy the only cases accepted by Special Civil Investigations (SCI) for fraud investigation are those in which, after detailed review, it is considered virtually certain for serious fraud can be established. Cases are usually taken up for enquiry only after many weeks of research about which the taxpayer and adviser will, almost certainly, know nothing.
This does not mean that every suspected case of serious fraud will be taken on. Specialist investigators’ time is very expensive and the group leader is required to use his limited resources most cost effectively. So, when deciding whether to register a case, the group leader takes the following considerations into account:-
The strength of the evidence and the likelihood that it will yield a substantial settlement (the more speculative the case, the less likely it is to be suitable for registration):-
- What steps will be open to HMRC in the face of a denial by the taxpayer of any irregularities and a complete absence of co-operation
- Whether HMRC have enough ammunition in the way of evidence to invoke the information powers in TMA 1970, s. 20
- The chances of success before the commissioners in a contentious hearing
- If the case has been submitted by the tax office solely or mainly because of the level of omitted profits, whether specialist fraud investigation techniques would be likely to lead to a substantial increase in the settlement. Clearly, if there are no grounds for doubting that a full disclosure has been made to the local tax office enquiry officer, nothing would be achieved by the intervention of SCI (except that it has the resources to investigate the case more thoroughly than perhaps the office can). This, incidentally, should act as an incentive to a taxpayer who has substantially understated profits to make a complete disclosure on challenge by the inspector in the district. Not only will he earn maximum abatement of penalty for disclosure, and co-operation; he will also probably thereby avoid registration by SCI, and the expensive and intrusive investigation report which would then be required.
The size of the settlement:-
- No matter how large the understatements of profits might appear to be, whether the settlement (including tax interest and penalties) will be substantial or whether the additional profits will be covered by reliefs.
- Whether the taxpayer has left the country with no prospect of an early return
The penalty position:-
- Whether the offence is only failure to notify chargeability for years when the maximum penalty was £100 p.a.
- Whether the penalty position is uncertain because of doubts over the legal basis for making assessments and recovering a penalty for all the years concerned (e.g. in the case of a deceased taxpayer)
The means position:-
- Whether the taxpayer is going to be able to fund a substantial settlement
- Whether he would be able to make large instalment payments out of future income.
If you are the subject of an HMRC tax investigation then call Kinsella Tax Investigations NOW on 0800 471 4546 where a team of dedicated specialists are waiting to take your call