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HMRC issues: Fraud Investigation Service


What is the role of the HMRC Fraud Investigations Service (FIS)

The HMRC Fraud Investigations Service (FIS) is an elite group of tax evasion and tax fraud investigators. Originally established in 2015, two existing HMRC teams, the Criminal Investigations Unit and the Special Investigations unit, joined to form the FIS.

So what is the role of the Fraud Investigations Service, and how do they fit into HMRC’s tax collection regime in the UK?

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The role of HMRC’s Fraud Investigations Service

The Fraud Investigations Service is regarded as a select HMRC team due to the expertise, skill, and experience of the individual investigators. The team is tasked with investigating cases of suspected serious and high value tax fraud and tax avoidance, both in this country and offshore.

By amalgamating the two previous teams, one of which had also contained the former civil investigation of fraud team, into one unit, HMRC created greater cohesion that has helped tackle serious tax fraud.

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Why was the Fraud Investigations Service set up?

HMRC came under pressure from the government to improve outcomes regarding criminal and civil tax evasion and fraud, both in respect of closing down criminal gangs, and also recovering civil tax revenues lost to fraud.

Figures published by international law firm, Pinsent Masons, show how successful the FIS has been in this respect:

  • Extra tax revenues of £5.47 billion were collected in the year to the end of March 2018, representing an increase of 6% on the previous year
  • Civil tax investigations yielded an extra 13% in 2017/18 compared with the year before

How does the Fraud Investigations Service operate?

The group investigates high value cases of criminal and civil tax evasion and tax fraud, and have recently stepped up their activities in relation to civil cases. Proposals have been made that would allow HMRC easier access to taxpayer information from external parties such as banks and accountancy practices, and the FIS branch investigating civil cases has also been expanded.  

A reason for this expansion could be that criminal investigations carry a greater burden of proof, and are therefore more costly to undertake. Civil investigations generally take place under what is known as Code of Practice 8 (COPD8) or Code of Practice 9 (COPD9).

In cases where serious fraud or tax evasion is suspected, and where a large amount of tax is involved, this is likely to be Code of Practice 9. This Code of Practice is sent to individuals to inform them of a pending investigation, but COPD9 also covers the companies with which an individual has been involved in the past.

Code of Practice 8, on the other hand, may be used for investigations where initially there’s no suspicion of fraud, although it’s possible that a COPD9 investigation could commence if the situation changed.

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What are the implications of being investigated by the FIS?

If you receive a letter regarding an investigation by the FIS, they’re likely to send a Code of Practice leaflet. This details the reasons why you’re being investigated, and also the scope of their investigation.

It might relate to assets held by your business abroad, for instance, bespoke tax planning schemes, or perhaps complex property affairs that your company is involved in, but these are just potential examples.

If you’re subject to a Code of Practice 9 tax investigation, you may be offered access to the Contractual Disclosure Facility. This provides protection from prosecution in relation to any tax fraud admitted within the facility document.

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Important features of the Contractual Disclosure Facility

  • You have this single opportunity to disclose your actions with regard to tax evasion or tax fraud
  • You must acknowledge that you tried to defraud HMRC by submitting misleading or inaccurate information, or using figures you knew to be incorrect
  • You receive protection from prosecution if you fully and honestly disclose your fraudulent or deliberately misleading actions
  • If your statements and disclosures are later found to be false, you could face prosecution

You have 60 days to return the disclosure form, otherwise it’s assumed the offer has been rejected. In this case you may be subject to prosecution depending on the results of the investigation by FIS.

It’s important that you understand the potential implications of investigation by the FIS, and obtain specialist assistance from professionals with prior experience in this area. Real Business Rescue can help in this respect. We offer free same-day consultations.

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