HMRC invests in Fraud Investigation Service ahead of Criminal Finances Act

HMRC invests in Fraud Investigation Service ahead of Criminal Finances Act

HMRC has increased investment in its Fraud Investigation Service staff, suggesting that investigations into large corporates may be in progress

HMRC has increased investment in its Fraud Investigation Service staff by 10%, increasing from £186m in 2015-16 to £204m in 2016-17, according to law firm Pinsent Masons.

The service, set up in 2015, works to combat tax fraud and houses HMRC’s specialist tax and criminal justice experts.

Pinsent Masons suggested that the investment indicates that HMRC may already be initiating investigations into large corporates ahead of the implementation of the Criminal Finances Act (CFA) in September. Legislation within the act makes failure to prevent tax evasion a criminal offence, meaning businesses would be liable for criminal acts committed by employees pertaining to tax evasion. A company may be able to avoid criminal liability by proving they had put in place appropriate measures to prevent such facilitation.

The law firm emphasised that the legislation will apply to all types of companies, not just banks and professional services firms.

According to Pinsent Masons, HMRC may use the Serious Organised Crime and Police Act (SOCPA) to mandate senior individuals to attend compulsory interviews, the failure of which could result in a maximum two year prison sentence. Any information obtained in these interviews could then be used against the company.

Jason Collins, partner and head of tax at Pinsent Masons, said: “Big ticket investment in staff at the Fraud Investigation Service is further evidence that HMRC is gearing up for a crackdown on tax evasion. With the increasingly blurred line about what constitutes acceptable tax practices, companies need to make sure they are not exposed to risk.

“It does look like HMRC is stepping up activity in advance of the new criminal law against businesses coming into force.  It is ploughing through data it has recently received under international treaties from low tax jurisdictions across the world in order to see if any rules have been broken.

Tax evasion tends to be prosecuted as a longer term ‘course of conduct’ rather than a single act. So, although a device for tax evasion may have been set up before the new rules became operational, the scope for prosecution under the new rules may still exist.

“This is just the beginning. We expect the number of investigations into corporates to keep climbing after the new corporate offence becomes operational in the autumn.

“Businesses must not wait for the new rules to take effect but should begin preparing their prevention measures and critical incident procedures now.

“As a by-product, these rules will make businesses revaluate and reassess their tax positions and relationships with customers and suppliers whereas they might not have done otherwise.”

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