Staffed by some of HMRC’s most experienced investigative officers, the Fraud Investigations Service Unit (FIS) is responsible for both civil and criminal investigations in the UK, though the vast majority of its cases are now civil.
Initial contact with those under scrutiny is typically made via letter, stating the legal basis for the investigation under the Finance Act 2007[1]Trusted Source – GOV.UK – Finance Act 2007 and other relevant statutes.
What to Expect During an FIS Investigation?
HMRCs fraud investigation process typically involves:
Interviews with relevant personnel (accountants, advisors)
Detailed review of financial affairs to identify discrepancies or irregularities
Potential on-site visits to business premises
Scrutiny of tax returns and accounts
Questions around sources of income, asset holdings, and business structures
Potential for large tax, penalty and interest assessments if irregularities are found
Possibility of criminal prosecution in cases of suspected serious tax fraud
Legal Implications of HMRC Investigations
If HMRC finds discrepancies that suggest intentional fraud, the penalties can be severe, ranging from heavy fines to criminal prosecution. Under the Fraud Act 2006[2]Trusted Source – GOV.UK – Fraud Act 2006, serious cases can result in imprisonment.
During an investigation, businesses have certain rights, including the right to legal representation and the right to appeal against decisions. It’s crucial to engage with legal professionals who advocate on behalf of the business.
HMRC FIS has requested a meeting, what should I do?
FAQs
How often does HMRC conduct random audits?
HMRC randomly selects businesses and individuals for audits to ensure compliance with tax laws. The frequency of these audits isn’t publicly specified, as HMRC uses a variety of methods and criteria to select cases that may include risk-based approaches.
What are the possible penalties for tax fraud in the UK?
Penalties for tax fraud can vary widely, from fines and surcharges to criminal prosecution for severe offences. The specific penalty depends on the nature of the fraud and whether it was deemed a result of negligence or deliberate action.
Can I negotiate with HMRC during a fraud investigation?
It is possible to discuss findings and disputes with HMRC during an investigation. Many issues can be resolved through dialogue, especially if discrepancies are due to misunderstanding or error. Legal or financial advisors can aid in these negotiations.
What steps can I take to prevent a tax investigation?
Ensuring accurate and timely submission of tax returns, maintaining detailed financial records, and consulting with tax professionals for compliance are effective steps to minimize the risk of an investigation.
Are there any specific sectors that HMRC targets more frequently?
While HMRC does not explicitly target specific sectors, businesses dealing with complex tax arrangements, large sums of cash transactions, or those in sectors with high levels of previous non-compliance (such as construction or restaurant industries) may face more scrutiny.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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