HMRC has been conducting more dawn raids in the last five years, increasing from 449 in 2011-2012 to 669 in 2016-2017. The increase has been part of HMRC’s efforts to suppress on white collar tax evasion.
Once they have obtained a warrant, HMRC usually carry out the search of a property where they suspect tax evasion have occurred. They can seize physical and electronic documents to use for prosecution. They have conducted 1,449 raids in 2015-2016 to 1,563 in 2016-20117 which is a rise of 8%.
This just shows that HMRC are not afraid to come down on large corporate companies that they suspect of tax evasion even though the reputational impact of dawn raids can be devastating to some companies.
Raiding is a vital way for HMRC to get hold of the crucial evidence it needs and they will continue to use everything that they have in order to target tax evaders including production orders. This is why their format of targeting tax evader might change.
There has been a decrease in raids relating to white collar tax evasion. However, this is not due to HMRC moving on a slow pace but rather, HMRC are shifting towards using production orders rather than undertaking raids which can be costly and disruptive.
Production orders obtained from a judge allow HMRC to get hold of documents from the evasion suspect and as well as third parties including advisers and banks.
Legislation is coming into force in 30 September under the Criminal Finances Act 2017 which makes failure to prevent tax evasion a criminal offence and will bring with it a bevy of new powers for HMRC to tackle tax evasion.
This means that HMRC will be investigating how businesses or their employees might be assisting or encouraging tax non-compliance by their business partners, customers, contractors, and suppliers. Hence, there may be an increase in raids after it becomes operation this September.
The banks and other professional services companies have a high risk of their staff or agents being involved in tax evasion due to the large amount of capital handled by them. However, the new offence applies to all sectors and all companies should be aware of how they may be affected.
Other than the new legislation, HMRC are also using the Serious Organised Crime and Police Act (SOCPA) to mandate senior individuals to attend compulsory interviews. Incompliance to this could result in a maximum two year prison sentence.
In order to mitigate the risk of such raids, companies should take a look at their raids and critical incident procedures and seek professional advise in order to know what to do in case HMRC officers appear without warning.