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HMRC Fraud Investigation Service

Established in 2015 through the merger of the Special Investigations Unit and the Criminal Investigations Unit, the Fraud Investigation Service (FIS) is the elite group within HM Revenue and Customs (HMRC) investigating cases of suspected serious tax evasion, tax fraud, and aggressive tax avoidance.

For decades, Governments of all colours have been concerned with closing down and seizing the assets of criminal gangs and recovering tax revenues denied to them through fraud. HMRC have been similarly concerned with closing the tax gap – the difference between what they think they should be collecting in tax and what they actually end up collecting.

The HMRC FIS was born as a result.

It’s a small but important part of the HMRC Enforcement and Compliance Team which has 26,000 staff working for it in 120 locations in the UK and in 30 countries around the world.

Its spin-off and specialist FIS team are considered as a success by many because of the billions of pounds extra raised each year as a result of their investigations.

If your financial and tax affairs are or may be under the scrutiny of the FIS team, what do you need to know and what exactly are you up against?

Are you currently being investigated or do you suspect you might be investigated? Call Black & White Accounting in strict confidence for advice and support – our freephone number is 0800 140 464 or you can email us by clicking here.

The four different departments within the HMRC FIS

FIS Prosecutions team

HMRC’s tax investigations and prosecutions team consists of 600 agents and their job is to target taxpayers suspected of early stage serious tax evasion.

Nearly every prosecution pursued by this team is civil and not criminal – in 2018, the number of individuals prosecuted mostly under the common law charge of “cheat” reached 1,000.

In a majority of cases, the investigators secured a conviction and a Money Laundering Regulations confiscation order against the offenders they prosecuted.

The HMRC’s prosecutions team also focuses on VAT fraud.

This tax is actually one of the hardest types of tax to evade or avoid because it’s a transaction-based tax and it needs to be accounted for on every sale you make.

HMRC is able to compare the financial records of the business they have suspicions about against the records of companies in the same sector to determine whether underreporting and underpayment may be taking place.

Investigations into UK tax matters

Taxpayers under investigation from the Bootle branch of FIS are likely to be suspected of serious fraud tax where there is no known overseas or offshore bank accounts or assets involved.

This department has responsibility for UK-based tax investigations and its officers primarily deal with suspected serious domestic fraud cases.

Contrary to popular belief, most tax fraud does not involve individuals and companies with offshore assets, property, or cash.

Investigation into overseas and offshore tax matters

On that subject though, a few years ago, HMRC offered a sort of amnesty to people with offshore assets, property, or cash through their now-closed “Requirement to Correct” campaign.

Its purpose was to encourage “those with undeclared offshore tax liabilities (relating to Income Tax, Capital Gains Tax or Inheritance Tax for the relevant periods) to disclose those to HMRC on or before 30 September 2018.”

For decades, international financial transparency was poor and tax-raising bodies like HMRC had to cajole tax evaders and avoiders using campaigns like these.

It’s different now with the Automatic Exchange of Information via the Common Reporting Standard (CRS).

The CRS is a shared file format used by tax authorities and financial institutions to send each other information about citizens and businesses. Over 130 countries are now party to the standard.

If you receive correspondence from FIS from a BX postcode, it’s likely that they believe that you have understated or hidden earnings from abroad.

What is the FIS task force?

HMRC’s task force’s job is to arrive unannounced at business premises to investigate whether various different taxes have been correctly reported and paid from VAT to National Minimum Wages and from Income Tax to Corporation Tax.

Their investigations are extensive and can take days or weeks to complete. If this happens to you, you should ask your accountant to be in attendance while the Task Force is at your business premises.

What are the three types of HMRC fraud investigation?

There are three types of investigation which HMRC’s FIS team undertake:

  • Full – where HMRC believes there is significant risk of fraud, they’ll undertake a full and wide-ranging investigation of the personal and corporate financial records of company directors and owners to look for evidence and details of wrongdoing;
  • Aspect – an “aspect” tax investigation focuses on a particular areas of concern within an individual or company’s financial and tax records; and
  • Random – as the name suggests, a random tax investigation is carried out on a business for no particular reason although anecdotal evidence suggests that cash-based businesses and companies sending & receiving international VAT invoices are more likely to be targeted than others.

What is the Code of Practice 8 (COPD8) and the Code of Practice 9 (COPD9)?

Tax fraud cases brought under Code of Practice 8 (COPD8) differ from tax fraud cases brought under Code of Practice 9 (COPD9)

Cases brought under Code of Practice 8 (COPD8) are when:

  • There is a suspicion than tax fraud or tax avoidance could have taken place;
  • They do not suspect that the tax fraud or tax avoidance was carried out deliberately; and
  • They’re seeking to recover a large amount of tax they believe you should have paid them.

Under Code of Practice 8 (COPD8), there is no guaranteed protection for you from a criminal investigation.

Cases brought under Code of Practice 9 (COPD9) are different in that, although it still concerns tax fraud, you will be offered something called a Contractual Disclosure Facility (CDF).

With a Contractual Disclosure Facility, the FIS gives you 60 days to disclose what tax should have been paid.

If you are offered the Contractual Disclosure Facility by the officers dealing with the tax investigation/enquiry into your affairs, you will be expected to make a:

  • Full admission of deliberate tax avoidance or tax evasion;
  • Full and extensive disclosure of all irregularities, errors, and omissions; and
  • Promise to fully cooperate with HMRC’s enquiries.

While this offer may sound attractive at first glance, we strongly advice you take professional advice because accepting an officer’s invitation to cooperate under COPD9 is, in and of itself, an admission of guilt. This admission of guilt usually means that the penalties you incur for your actions will be significantly higher once the enquiry has ended and a verdict has been reached.

You are under no obligation to accept FIS investigators’ offers of either a COPD8 or a COPD9.

FIS Quick FAQ

How long does it take for HMRC to investigate fraud?

Most investigations last for several months. To speed up the process, FIS officers will ask that you respond to any letter sent from them to you in the space of 30 days to help them bring their investigation to a close as soon as possible.

How do I know if HMRC are investigating me?

HMRC do not notify you necessarily if they begin to look into your tax affairs however, if they make the investigation formal, they will send you a letter asking for more information normally on a restricted area of tax they are interested in finding out more about. It is not uncommon for an investigation to be widened later on.

How does HMRC calculate tax penalties for fraud?

There are set and fixed penalties if you, for example, miss a filing or a payment deadline. Financial penalties issued as a result of a tax investigation are normally percentages or multiples of the tax owed with interest applied to those amounts for the duration of time they’ve been unpaid.

How do I report fraud to HMRC?

HMRC prefers fraud to be reported in the first instance using one of its online forms.

Be represented during a fraud investigation

The HMRC FIS team have a statutory duty to investigate fraud and serious tax evasion. As much as someone may feel that it is unjust singling them out for investigation, please remember that they are doing their job and they only want to find the guilty.

You will need professional representation if you’re being investigated by the FIS – specifically a solicitor and an accountant. Many prosecutions can be avoided if a taxpayer assembles the right team to defend them.

To find out more, please get in touch with us today, by contacting Black and White Chartered Certified Accountants, populating the “Got a Question” form on the right, or call us on our freephone number 0800 140 464 for confidential advice.

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