What Are Your Rights in a HMRC Investigation Under Caution?

If HMRC becomes suspicious of your company’s tax-related activities, it’s likely that you will receive notice of an investigation under caution.

Most commonly, if investigators have been made aware of any discrepancies or apparent mistakes within your tax returns, you will be asked to provide information to clear up the issue. If you fail to do so within the allotted time frame, or if the information you give is considered to be inadequate, HMRC will proceed with their criminal or civil investigation until it has reached a satisfactory conclusion.

According to Shahid Miah, from DPP Business & Tax, this may involve inviting you to attend an interview under caution, requesting that you utilise their Civil Disclosure Facility under COP9 to admit any careless or dishonest activity, or even prosecuting you.

What Should You Do in an Interview Under Caution?

Usually, the interview will be conducted by two HMRC officers unless you are being jointly investigated by another body, in which case one of the two investigators present will represent the second organisation.

If you agree to attend an interview under caution, you should first notify your solicitor and ensure that they will be present alongside you. It’s a very good idea to take notes of the questions you are asked and the responses you have given.

Before attending, informed by any weaknesses you may have found in your accounts or records, you should work through possible interview questions with your legal advisor and decide on the best ways to answer them. This article by Mark Nelson from the Croner-i online library provides excellent examples of ways to prepare.

In the interview, if you decide to answer a question, you should do so honestly and carefully. Do not be dishonest or provide vague or allusive responses, as this may reflect very badly on you. For example, if you lie that an incriminating document is missing, you may be suspected of destroying evidence.

You should never underestimate the investigative powers of HMRC during your interview. If you fail to provide them with the information they require, they are within their rights to obtain it from other sources and may even raid your place of work to do so.

The best policy throughout an HMRC investigation under caution is to be as honest and forthcoming as you can, and take care in the planning of your responses to their requests. If you fail to provide the correct information, you or your company may be prosecuted for offences as serious as money laundering or cheating the public revenue, both of which come with hefty sentences if you are found guilty.

What Are Your Rights in an HMRC Interview Under Caution?

As part of an HMRC investigation under caution, you may receive a letter inviting you to an interview. Depending on the perceived severity of your alleged offence, this may take place at either a location of HMRC’s choosing (for civil enquiries) or at a police station (for criminal investigations).

It is worth noting that the intention of the HMRC officers conducting an interview under caution is to persuade you to admit wrongdoing, or to “trip you up” or trap you. Criminal investigations require that investigating officers employ an “innocent until proven guilty” approach, so under these circumstances, the onus is upon them to provide sufficient evidence of wrongdoing in order to successfully see you convicted. However, in civil cases, their approach is to proceed as if you have definitely committed fraud until you are able to comprehensively prove otherwise – and even then, you must persuade them that the tax you have paid is correct, and that you do not owe any additional amount.

To this end, every recipient of an invitation to interview must make themselves thoroughly aware of their HMRC investigation under caution rights immediately.

So to answer the question, what are your rights in an HMRC interview?

Non-attendance

You do not have to attend an HMRC interview under caution, and if you do, you do not need to adhere to their instruction as to where it is to take place (unless you have been invited to a police station as part of a criminal investigation). You are completely within your rights to request a different date for the interview, and to demand that it takes place at a location where you are more at ease.

Legal representation

Not only is it your right to seek the assistance of a legal advisor to attend the interview alongside you, but you may also request that the interview be postponed until you have sufficient representation in place. This is something that you should seriously consider doing, as a good solicitor specialising in fraud and tax evasion will be able to assist you in:

  • Going through your accounts and records to work out why you might be under investigation and what HMRC are hoping to achieve by interviewing you
  • Gathering and presenting evidence of your innocence
  • Helping you decide what to say in your interview

Your legal advisor will also be able to help you decide whether or not it is within your best interests to attend an interview in the first place.

Refusing to answer

You are permitted to decline to answer questions, and you will be informed of this right at the start of your interview. However, if you are later prosecuted for the alleged offence in question and provide evidence or information in court that would have served as an answer to the said questions, the court will take this into account and question why you did not offer this at the time.

Records of the interview

The interview will usually be recorded by two tape recorders. You’ll then be requested to sign a paper seal securing one of the tapes to prevent tampering. You’ll be told how to receive a copy of the recording, which is highly advisable. You can also ask for a transcript. A further permissible step is to make your own notes during the interview in order to compare them with any transcripts you later receive.

Refusal of Cautions or Penalties

After the interview, HMRC may decide to terminate the investigation. Otherwise, they may issue you with a formal caution in place of prosecution, which you can agree to receive (thereby admitting the offence) or decline. You may also be served with an administrative penalty in place of prosecution, which you may also refuse if you so wish. Refusal of either of these options is likely to result in prosecution.

Appeal

While the decision of HMRC to move forward with prosecution is non-negotiable, you may appeal any request for you to pay a fine or additional tax after an investigation or review. To do this, you may consider Alternative Dispute Resolution or an application to the Tax Tribunal. This must be done within 30 days of receiving a decision as the result of your HMRC investigation under caution.

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