7 APRIL 2000 POWERS TO COMBAT SERIOUS TAX FRAUD

The criminal investigation by the Inland Revenue of suspected serious tax fraud will be modernised by provisions included in the Finance Bill published today. The provisions were published in draft last year and have been revised to take account of comments received.

Tax investigators who have reasonable grounds for suspecting serious tax fraud will be able to apply for a judicial order requiring people to supply them with documents which may be needed as evidence. This will substantially reduce the need to enter and search premises of people who are not themselves suspected of fraud.

When the provisions were published in draft, the principle behind them was generally felt to be reasonable, but many of those who commented thought that the proposed safeguards and limits on the use of the power needed to be strengthened and clarified. The Government has listened carefully to these concerns, and has altered the provisions so that they more clearly protect the rights of the citizen, whilst remaining an effective tool for criminal investigations.

DETAILS

1. A Technical Note published in November 1999 set out proposals for a new Inland Revenue power to require the production of documents for use in criminal investigations into suspected serious tax fraud. Comments were invited, and in the light of them, a number of changes have been made:
the level of judicial authority needed to approve an order has been set at circuit court judge or equivalent, instead of stipendiary magistrate
the scope of documents that may be required has been limited to those that may be evidence of the suspected offence
documents subject to legal professional privilege are now exempt regardless of who holds them
the time normally given for complying with an order will be 10 working days, instead of 7 days
rights of recipients to appear at the hearing when the order is applied will now be the subject of a specific statutory provision (rather than governed by case law)
detailed points of procedure will be covered in regulations
2. A draft of the proposed regulations will be issued for comment as soon as possible and will cover the resolution of disagreements over whether documents are privileged, the internal Inland Revenue procedures for approving applications for orders, and other procedures concerned with the hearing of applications and the production of documents.
3. Minor changes to the Inland Revenue’s existing search power are also proposed including:
clarification of the Inland Revenue’s right to print- outs of relevant documents stored on computer, and
extension of the exemption for documents within legal professional privilege
4. Most responses were not submitted in confidence, and may be inspected in full at
Inland Revenue Information Centre
Ground Floor
South West Wing
Bush House
Strand
London WC2B 4RD (Telephone 0171 438 6420)

between 9.00am and 5.00pm, or at a local tax office by prior arrangement. A summary of responses is also available from the Information Centre, and on the Internet at: http;//www.inlandrevenue.gov.uk

NOTES FOR EDITORS

5. Most of the Inland Revenue’s enquiries are not conducted on criminal lines and, where appropriate, lead to civil financial settlements. But every year a small number of investigations into suspected serious offences are conducted with a view to prosecution. These investigations are carried out under the appropriate criminal procedures and (in England and Wales) in accordance with the Police and Criminal Evidence Act 1984 including the associated Codes of Practice.

6. Evidence which may be required in a prosecution for serious tax fraud is often held by banks, lawyers, accountants and other third parties who have business connections with the suspected person but no knowledge of the suspected fraud. Considerations of client confidentiality usually prevent such businesses from supplying that evidence voluntarily to the Inland Revenue.

7. At present, in order to obtain the evidence needed for the purposes of a criminal investigation, the Inland Revenue sometimes finds it necessary to obtain warrants to search their premises, as well as those of the suspect, to seize evidence. The use of a search warrant can be a source of considerable commercial embarrassment to them as well as a cumbersome procedure for the Inland Revenue. The availability of the proposed power will nearly always avoid the need for searches of this kind.