Fraud Investigation Service

Who are the Fraud Investigation Service?

HMRC's Fraud Investigation Service (FIS) unit is the “elite” branch of HMRC tax investigators. The Fraud Investigation Service deal with suspected serious tax fraud and what HMRC believes to be aggressive tax avoidance.

FIS is basically split into three different units dealing with the following:

FIS Prosecutions

There are approximately 600 staff within the department who solely focus on prosecution work. Although the majority of cases dealt with by HMRC in FIS are done on a civil basis, with the rise in political pressure to prosecute more people this unit has expanded significantly over the last few years. When FIS are initially considering matters where they suspect serious tax fraud, they always consider whether there is sufficient evidence and public interest to prosecute.

Last year (2018) HMRC prosecuted over 1000 individuals for tax evasion (usually the common law charge of cheat).  In most of these cases HMRC were successful in both obtaining a conviction and also obtaining a confiscation order under the Money Laundering Regulations which means that the individual has to repay the proceeds of the tax evasion (that is the total amount evaded) not just the tax that was originally due.

A number of these prosecutions could have been avoided if the individual had sought professional representation when HMRC first made contact with them.

HMRC have a prosecution policy which is contained at HMRC Criminal Investigation Policy.

The most common cases we have seen recently involve people who have mislead HMRC about the extent of their tax evasion at an early stage where HMRC already have evidence to contradict this.  VAT offences are also easier to prosecute as it is a very transactional tax.

Offshore Tax Matters

Over the last 10 years HMRC have offered a number of disclosure facilities and encourages people to bring any offshore tax matters up to date. There has been considerable worldwide pressure with regards to tax havens and offshore tax matters including a number of incidences of information coming into the public domain (HSBC and Mossack Fonseca being two of the more notable ones).

In September 2018 a worldwide automatic exchange of information agreement came into force where if a financial institution has details of a person holding assets or accounts with an address in a different country this is automatically sent to the tax authority of the country of the account holder.

As a result of this we have seen many letters issued by HMRC’s Risk and Intelligence.

We have also seen a Code of Practice 8 (not suspected of tax fraud) and a Code of Practice 9 (suspicion of tax fraud).

To facilitate this automatic exchange of information legislation HMRC split the FIS teams into offshore and onshore. There is a big drive in HMRC to show that the automatic exchange of information regulations work, and to ensure that there are some high profile prosecutions for offshore matters.

It is not always clear that the issue relates to an offshore matter but if they have not put this in the title usually offshore has a BX post code and Bootle is solely onshore.

UK Tax Matters

HMRC believe that there are still a number of people who commit serious tax fraud whilst not having an offshore asset or bank account.

This is undoubtedly true and probably most instances of serious tax fraud do not involve offshore assets. Thus, HMRC realise that despite all the political pressure to get high profile offshore matters dealt with, there is a need to keep a focus on solely UK matters.

Therefore, Fraud Investigation Service has a specific unit to seek information and to investigate people who have no link to offshore tax evasion. As the Government has vowed to crack down on these matters, this unit is also well staffed with experienced tax investigators.

As explained above it is not always clear which department of FIS is investigating but onshore usually has a Bootle address.

Task Forces

This has been a particularly lucrative market for HMRC Fraud Investigation Service where they will turn up unannounced at a business with a team of tax investigators covering all taxes from Corporation and Income Tax to National Minimum Wage specialists and VAT investigators.

HMRC will then conduct an enquiry which can last for days at the business site (or take a significant amount of information with them). These are often very sector specific and will involve several visits to a number of businesses in a geographical area.

These visits have generated a number of Contractual Disclosure Facility enquiries and are an area where the approach has been extended from solely an FIS matter to a practice that is being adopted by HMRC in other investigations.

Fraud Investigation Service help

Fraud Investigation Service generally deal with cases using Code of Practice 9 under the Contractual Disclosure Facility which is generally issued when HMRC are undertaking at tax investigation into tax fraud or for large tax avoidance cases under Code of Practice 8.  There has been a marked increase in the use of Code of Practice 8 for offshore matters with regards to none domicile individuals.

FIS only deal with Code of Practice 9 tax investigations using the Contractual Disclosure Facility where HMRC believe that the tax at risk is over £75,000. Although in accusing someone of tax fraud by the issue of a Code of Practice 9 tax investigation, HMRC are not always right. The Fraud Investigation Service unit have extensive access to data from financial institutions, land registry and many other sources and powerful data mining tools which they use to identify cases where they suspect serious tax fraud.

Anyone whom has received a letter from HMRC's Fraud Investigation Service should seek professional representation from a tax advisor experienced in dealing with these matters whether under the Contractual Disclosure Facility, Code of Practice 9 or Code of Practice 8.

HMRC's Fraud Investigation Service also deal with any prosecutions for tax fraud and any letter received from them should be taken very seriously.

Gilbert Tax have extensive experience in dealing with HMRC's Fraud Investigation Service unit.