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Most HMRC investigations never become criminal. The ones that do are often decided by what happens in the first few weeks, before anyone has been arrested. HMRC's compliance work brought in more than £41 billion in the tax year to April 2024, and very little of it is random: advisers commonly report that the great majority of HMRC investigations, by some estimates over 90%, are prompted by specific risk information rather than chance.
HMRC investigates tax fraud in two ways, and every tax investigation starts with a choice between them. The great majority of cases are handled civilly: HMRC recovers the tax, with interest and penalties, and nobody is prosecuted. A small minority are run as a criminal investigation with a view to criminal prosecution, with the powers of arrest, search warrants and interview under caution, and end with a file sent to the Crown Prosecution Service. The facts in the two kinds of case can look very similar. What differs is the route HMRC chooses, and that choice is not fixed at the outset. A case opened civilly can become criminal, and the conduct that moves it there is very often the taxpayer's own response to the enquiry.
I have prosecuted and defended financial crime, and in my experience the people who end up in an HMRC criminal investigation rarely saw it coming. The good news is that the route is rarely fixed on day one. At Lex Vindico Group we can act before HMRC has decided which way a case will go, and that is where the most can be influenced. This guide explains how HMRC decides between civil and criminal investigation, the signs that a matter has been taken criminal, the tax evasion offences and their maximum sentences, HMRC's powers, and where the defence begins. It is for business owners, directors, professionals, anyone whose business is facing an HMRC investigation, and individuals with complex tax affairs who have received a letter from HMRC, been invited to interview, or are worried that an HMRC tax investigation is heading somewhere more serious.
An HMRC criminal investigation is an investigation by HM Revenue and Customs into suspected tax fraud, conducted with a view to prosecution rather than recovery of tax. Serious cases, civil and criminal, are handled by HMRC's Fraud Investigation Service (FIS), whose HMRC investigators deal with both civil and criminal tax investigation work. In a criminal case, HMRC officers act as investigators in much the way police officers do: they can obtain search warrants and production orders, arrest suspects, and interview them under caution. The Police and Criminal Evidence Act 1984 applies to HMRC criminal investigations, with modifications, so the same safeguards on search, arrest, detention and interview apply.
The decision whether to prosecute is not HMRC's. HMRC's criminal investigation policy states that prosecution decisions are made by independent prosecution authorities; in England and Wales, that is the Crown Prosecution Service (in Scotland, the Crown Office and Procurator Fiscal Service, and in Northern Ireland, the Public Prosecution Service), which applies the Full Code Test: whether the evidence provides a realistic prospect of conviction and whether a prosecution is in the public interest.
HMRC's criminal work is growing, not shrinking. According to HMRC's annual report for 2025-26 and its Fraud Investigation Service technical note, HMRC formally adopted 494 criminal investigations in 2025-26, up 10.8% from 446 the year before. It secured 260 convictions against serious tax evaders and reported winning 87% of the prosecutions it brought. Its criminal investigations delivered around £2.1 billion to the Exchequer, up 39% from £1.52 billion, and analysis of the same data by accountants UHY Hacker Young puts the number of people awaiting trial for tax offences at around 1,100. In 2024-25, the courts imposed 141 immediate custodial sentences for HMRC prosecutions, averaging 35 months.
Those numbers are small against the millions of taxpayers HMRC deals with, but they are the reason a tax enquiry can never be treated as purely a matter of money. HMRC is recruiting and training more criminal investigators, and it has said publicly that it wants to prosecute more.
HMRC publishes an annual estimate of the tax gap: the difference between the tax that should be paid and the tax receipts actually collected. Its estimates attribute part of the tax gap to evasion, the hidden economy and criminal attacks on the tax system, alongside error and failure to take reasonable care. Closing the tax gap is the purpose of HMRC's whole compliance effort, and criminal prosecution is a small part of it by number of cases. Its value lies largely in deterrence, which is why HMRC's published policy speaks of cases needing a strong deterrent message.
Selection for criminal investigation therefore does not turn on the amount alone. A case with a modest loss to the tax receipts can be investigated criminally because of who is involved or how the fraud was carried out, and a larger one can be settled civilly.
Very few investigations are random. HMRC's Connect system cross-matches information from banks, the Land Registry, online marketplaces, company records and many other sources against what taxpayers declare. Under the Common Reporting Standard, financial institutions in more than 100 jurisdictions report account information on UK residents to HMRC automatically, and since 2024 digital platforms have had to report what sellers earn. HMRC also receives tip-offs from the public, former employees and former partners, and information from other agencies. Disclosure campaigns, such as the Let Property Campaign, and the Worldwide Disclosure Facility for offshore income, give people a route to come forward before HMRC comes to them, and an unprompted disclosure is one of the factors HMRC weighs in deciding against a criminal investigation.
HMRC's policy is to deal with tax fraud through its cost-effective civil fraud investigation procedures under Code of Practice 9 wherever appropriate. Criminal investigation is reserved for cases where HMRC needs to send a deterrent message, or where the conduct involved is such that only a criminal sanction is appropriate. One factor HMRC considers is whether the taxpayer has made a complete and unprompted disclosure of the offences committed.
HMRC reserves complete discretion to conduct a criminal investigation in any case. Its published policy lists the kinds of case in which it will generally consider one. The list is not exhaustive, and includes:
Two points on that list matter more than the rest for most people reading this. The first is position of trust or responsibility, which in practice catches company directors and professionals. The second is materially false statements or documents in a civil investigation: a case that starts civil and could have stayed civil can be moved onto the criminal route by what is said to HMRC during the enquiry itself.
Where HMRC suspects tax fraud and decides to deal with it civilly, it opens an investigation under Code of Practice 9 (COP9) and offers the Contractual Disclosure Facility (CDF). The CDF is a contract. If the taxpayer accepts it and makes a full and truthful disclosure of all deliberate conduct, HMRC will not open a criminal investigation into the conduct disclosed. The taxpayer pays the additional tax, interest and penalties, and the tax affairs covered by the disclosure are settled civilly.
The deadlines are short. The taxpayer has 60 days from receiving the CDF letter to accept the offer and provide an outline disclosure of the deliberate conduct, with the tax years and amounts. Silence for 60 days is treated as a decision not to cooperate. Rejecting the CDF, or denying that any deliberate conduct took place, leaves HMRC free to investigate as it sees fit, including criminally.
Three limits on the CDF are easy to miss:
That is why a COP9 letter is as much a criminal law matter as a tax one. The tax compliance question is how much is owed. The criminal question is whether the response keeps the case civil.
Staying civil is not the same as escaping consequences. A standard enquiry typically reviews the last four years of tax returns. HMRC can look back six years where the loss was brought about carelessly, and up to 20 years where it was brought about deliberately. Civil penalties for deliberate inaccuracies are charged as a percentage of the tax lost and can reach 100%, and up to 200% where offshore matters are involved, with reductions for disclosure and cooperation. The tax, interest and penalties together can exceed the original tax many times over, and the business still has to pay them. Even so, for most people the civil route is the one to protect, and the decisions that protect it are made early.
A civil HMRC enquiry and an HMRC criminal investigation look different from the outside. The signs that a case is being run as a criminal investigation include:
By contrast, a compliance check letter, a request for information under HMRC's civil information powers, or a COP8 avoidance enquiry is not a criminal investigation. A COP9 letter is a civil investigation into suspected fraud, which is precisely why it needs a criminal lawyer's view of the response as well as a tax adviser's.
If you are invited to an interview under caution, the investigation is criminal. Our guide to voluntary interviews under caution explains what that involves, and our guide to dawn raids explains what to do when investigators arrive with a warrant.
An HMRC criminal inquiry usually moves through the same stages, and HMRC's own published statistics track each one. First, intelligence is gathered, often for months, without the suspect knowing. Second, the case is formally adopted by the Fraud Investigation Service as a criminal inquiry. Third, there are searches, arrests or invitations to interview under caution, with devices and documents seized. Fourth, after further analysis, HMRC submits the file to the prosecutor for a pre-charge decision. Fifth, if the prosecutor decides to charge, the case goes to court, usually the Crown Court for anything substantial. At every stage before the pre-charge decision, the defence can still put material and argument forward. After charge, the same work continues, aimed at a review of the charge and, where the evidence does not support it, a discontinuance.
Tax evasion is illegal: it is the dishonest non-payment or underpayment of tax, for example by concealing income, inflating expenses, failing to declare offshore assets, falsifying records, or deliberate misrepresentation of the facts to HMRC. Tax avoidance is using arrangements to reduce tax in a way the law may or may not allow. An avoidance scheme that fails is a civil matter: the tax is due, with interest and possibly penalties for a lack of reasonable care.
Avoidance becomes a criminal matter where it is supported by dishonesty. HMRC's policy specifically lists schemes that rely on a false or altered document, or where material facts are misrepresented to enhance the credibility of the scheme. The question in any criminal inquiry is therefore not whether the taxpayer failed to pay the right tax, but whether there was dishonesty. That is a question about state of mind, and it is answered by documents, correspondence and, very often, what the person says in interview.
A taxpayer who is criminally prosecuted can be charged under several different offences, depending on the tax, the conduct and the amounts. The penalties are severe.
The most serious tax fraud is usually charged as cheating the public revenue, a common law offence with a maximum sentence of life imprisonment. It covers any form of fraudulent conduct that results in diverting money from the revenue, and it is used for large-scale and complex cases, including organised VAT fraud.
It is an offence under section 106A of the Taxes Management Act 1970 to be knowingly concerned in the fraudulent evasion of income tax, by yourself or another person. The maximum sentence on indictment is 14 years' imprisonment, an unlimited fine, or both. On summary conviction, it is 12 months or a fine.
Section 72 of the Value Added Tax Act 1994 makes it an offence to be knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of VAT, and separately to produce false documents or make false statements for VAT purposes. Since 22 February 2024, the maximum on indictment has been 14 years, doubled from seven.
Tax fraud can also be charged under the Fraud Act 2006, most often as fraud by false representation, which carries a maximum of ten years. We explain how that offence works in our guide to fraud by false representation.
Destroying, falsifying or concealing accounting records, or using records known to be false, for gain or to cause loss, is false accounting under section 17 of the Theft Act 1968, with a maximum of seven years. It is often charged where business records were altered to reduce declared profits.
Missing trader intra-community (MTIC) fraud, often called carousel fraud, involves goods or services traded through a chain of businesses so that VAT is collected by one trader who then disappears, while another reclaims it. These cases are usually large, organised and charged as cheating the public revenue or conspiracy, and they are a long-standing priority for HMRC's criminal investigators.
For tax years from 2017-18, it is an offence under section 106B of the Taxes Management Act 1970 to fail to notify chargeability to tax where the tax is chargeable on offshore income, assets or activities and exceeds a threshold, set at not less than £25,000 for the tax year. No dishonesty is required, but it is a defence to show a reasonable excuse.
Under section 45 of the Criminal Finances Act 2017, a company or partnership commits an offence if a person associated with it, such as an employee or agent, criminally facilitates tax evasion while acting in that capacity. The only defence is that the company had reasonable prevention procedures, or that it was not reasonable to expect it to have any. The penalty is an unlimited fine. The offence was slow to be used, but HMRC brought its first prosecution under it in 2025, and HMRC has a number of further corporate investigations under way. Section 46 applies the same principle to the facilitation of foreign tax evasion. The 2017 Act sits alongside the newer failure to prevent fraud offence, which we cover in our guide to failure to prevent fraud.
Professionals who help others move or conceal funds also face money laundering exposure under the Proceeds of Crime Act 2002, which HMRC's policy singles out. Our guide to money laundering under POCA explains those offences.
HMRC's criminal inquiry powers are much closer to those of the police than to its civil tax investigation powers. For example:
A conviction for a tax offence committed in connection with a company can also lead to disqualification as a company director for up to 15 years, and for professionals the reputational damage of an investigation often arrives long before any verdict.
Complex cases can take years from the first search to a charging decision, and the tax system's civil and criminal regimes, and other regimes such as a professional regulator's, can run against the same person in parallel.
The most valuable work in an HMRC case is often done before anyone has been arrested, and before the business owner has even realised how serious things could become. HMRC's own policy is to deal with fraud civilly wherever it can, and to reserve criminal investigation for cases that need a deterrent or where only a criminal sanction will do. Whether a case falls on one side of that line or the other is a judgement HMRC makes on the information in front of it. That information can be shaped.
Our work starts there. Where HMRC has opened a COP9 enquiry, or raised concerns that point towards fraud, we act proactively, alongside your tax advisers, to keep the matter in the civil regime. That means advising on the Contractual Disclosure Facility well before the 60 days run out; making sure any disclosure is complete, accurate and safe from a criminal perspective, because what is admitted becomes evidence; and, where it helps, putting written representations to HMRC explaining why the conduct, the amounts and the circumstances belong in a civil settlement rather than a prosecution. The factors HMRC weighs are in its own published policy: whether there was a full and unprompted disclosure, whether false statements were made, whether a position of trust was involved. We address each of them directly, in writing, before the decision is taken.
Where HMRC has already gone criminal, the work continues. We represent clients at interviews under caution, so that the account is given on proper disclosure and on advice. We then put pre-charge representations to HMRC and the prosecutor, addressing both stages of the Full Code Test: whether the evidence proves dishonesty at all, and whether a prosecution is in the public interest where the tax can be recovered civilly. If a charge has already been brought, we press for the charging decision to be reviewed and, where the evidence does not support it, for the case to be discontinued.
No one can guarantee which route HMRC will take. What proactive representation does is make sure that, at every stage, the person making the decision has the full picture, and that the picture is accurate.
Most people who end up being criminally prosecuted for tax fraud first come to HMRC's attention through a civil enquiry, a disclosure from a third party, or data HMRC receives automatically from banks and overseas tax authorities. The point at which the route is decided is often weeks or months before any arrest.
That is where the defence begins, and it begins with two practical rules. Preserve every record: destroying or altering documents once an investigation is in contemplation can be an offence in itself, including perverting the course of justice, and it is the kind of deliberate concealment that HMRC's policy lists as a reason to go criminal. Say nothing to HMRC about the substance until you have taken advice. In a COP9 case, where HMRC is investigating suspected fraud civilly, the decision whether to accept the CDF, and what the outline disclosure says, needs criminal as well as tax advice, because the disclosure is the evidence. In a criminal inquiry, the interview under caution is where the account that will be tested at trial is first given, often on very limited disclosure of what HMRC holds. We explain how that decision is approached in our guide to no comment or a prepared statement.
After interview, many tax fraud investigations run for a long time before the file goes to the CPS. That period can be used. The documents, the accountant's working papers, the advice received and the explanation for each transaction can be gathered and put to the decision-maker in writing, through pre-charge representations, before the Full Code Test is applied. Dishonesty is the issue in nearly every case, and it is the issue on which the evidence most often has more than one reading.
A charge does not end the analysis. Where someone has already been charged with a tax offence, we put the same analysis to the prosecution and seek a review of the charging decision and, where the evidence does not support the charge, a discontinuance, rather than waiting to win at trial. In tax cases, that analysis often turns on whether the conduct was dishonest at all, or was a failure of reasonable care that belongs in the civil regime. We explain how charging decisions are made in our guide to how the CPS decides to charge.
We understand what an HMRC investigation does to the people who run a business. The letter arrives while there are still staff to pay, customers to serve and suppliers to manage, and it sits in the background of every decision until it is resolved. Sleep goes, and so does focus. Our job is to take the weight of the criminal risk off your shoulders, so that you can keep running the business while we protect your future.
We act for individuals, directors and professionals across England and Wales facing HMRC investigations where there is a risk of criminal inquiry, or where one has started, and we act early, often before HMRC has decided which route to take. We work alongside the client's tax advisers, who can negotiate the civil settlement with HMRC, so that the client can keep running their business while the investigation is handled for them: the tax advisers address what the taxpayer has to pay, and we address the criminal exposure. That means advising on the response to a COP9 letter before the 60 days run out, attending interviews under caution, dealing with warrants and frozen accounts, and putting the evidence on dishonesty to HMRC and the CPS before a charging decision is made. For regulated professionals, an HMRC investigation also engages a regulator, and we plan for that alongside the criminal case.
If you have received a COP9 letter, been invited to an interview under caution by HMRC, or HMRC has executed a warrant, speak to us before you respond. If you are simply worried that a tax enquiry is heading somewhere more serious, speak to us now: the earlier we are involved, the more we can influence how it goes.
A criminal inquiry usually becomes apparent through arrest, a search warrant, an invitation to an interview under caution, or a letter stating that HMRC is conducting a criminal inquiry. A compliance check or a COP8 enquiry is civil. A COP9 letter is a civil investigation into suspected dishonesty, and the response to it can decide whether the case stays civil.
Yes. Fraudulent evasion of income tax and of VAT each carry up to 14 years' imprisonment on indictment, and cheating the public revenue carries up to life. The sentence in any case depends on the amount, the role played, the duration and the mitigation, under the Sentencing Council's fraud guidelines.
In a civil investigation, HMRC establishes the tax due and seeks payment with interest and penalties. In a criminal inquiry, HMRC gathers evidence, using warrants, production orders and interviews under caution, and sends a file to the CPS, which decides whether to prosecute.
Tax evasion is the dishonest non-payment of tax and is a crime. Tax avoidance is the use of arrangements to reduce tax, which may or may not work; a failed avoidance scheme is a civil matter unless it involved dishonesty, such as false documents or misrepresented facts.
Often a long time, and longer than a civil tax investigation. Complex cases involving several years, companies or jurisdictions can take years from the first search to a charging decision, and suspects may be on bail or under investigation for much of that period.
Not where fraud is suspected. Running a business and handling an HMRC investigation at the same time is hard enough; doing it without advice is where mistakes are made. A taxpayer subject to a COP9 enquiry or a criminal inquiry is in a different position from one subject to a routine check. In a COP9 case or a criminal inquiry, what you say to HMRC can be evidence, and a materially false statement in a civil investigation is a listed reason for HMRC to go criminal. Take tax and criminal advice before responding.
Yes, where tax was lost through deliberate behaviour. HMRC can normally assess four years back, six where the loss was careless, and up to 20 years where it was deliberate. There is no time limit on prosecuting the indictable tax offences.
Yes. In a criminal inquiry, HMRC officers can arrest suspects, apply for and execute warrants, and interview under caution, with the safeguards of the Police and Criminal Evidence Act 1984 applying. In a civil investigation, they cannot.
Both are civil. COP8 covers serious tax avoidance and complex technical cases where fraud is not suspected. COP9 is used where HMRC suspects fraud, and it comes with the Contractual Disclosure Facility, which offers protection from criminal inquiry in exchange for a full disclosure.
Often, yes, but only with advice. An unprompted disclosure reduces penalties and is one of the factors HMRC weighs against criminal inquiry, but what you disclose, and how, needs both tax and criminal input.
No solicitor can guarantee it, because the decision is HMRC's. Early, accurate representation, a properly handled disclosure and written representations on why a case belongs in the civil regime do address the very factors HMRC's own policy says it weighs. The earlier that work starts, the more influence it has.
As soon as there is any suggestion of fraud: a COP9 letter, a request for an interview under caution, a visit from HMRC officers, or a worry that past returns were wrong. Proactive representation is most effective before HMRC decides which route to take, and before anything is said to HMRC about the substance.
No. HMRC investigates, and in England and Wales the Crown Prosecution Service decides whether to charge, applying the evidential and public interest tests in the Code for Crown Prosecutors.
Lex Vindico Group is regulated by the Solicitors Regulation Authority. We represent individuals nationally across England and Wales in criminal, regulatory, and parallel-proceedings defence at every stage: our work starts at the pre-charge stage and continues through charge, trial and appeal.
This article is written by Akram Mula, LLM, Solicitor Advocate and CPS-approved Prosecutor, founder of Lex Vindico Group. It is general legal information about HMRC criminal investigations and tax evasion offences in England and Wales, not legal advice on any specific case. Figures are taken from HMRC's annual report and Fraud Investigation Service technical notes, and were last checked in November 2026. For advice on your specific circumstances, contact our team directly.
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