Updated for 2026. Written by Tax Dispute Consultants, specialist ex-HMRC tax investigation team. Read time: 14 minutes.

An HMRC criminal investigation is not a more serious version of a routine tax enquiry, it is a fundamentally different process with fundamentally different consequences. Arrest, prosecution, imprisonment, a public criminal record and the seizure of assets under the Proceeds of Crime Act are all in play. Understanding the distinction between civil and criminal investigation and knowing what to do the moment you suspect HMRC has chosen the criminal route, can determine whether this episode ends in a civil settlement or a Crown Court dock.

On this page

  1. Civil vs criminal: the fundamental distinction
  2. HMRC’s Criminal Investigation Policy
  3. The Fraud Investigation Service (FIS)
  4. Criminal offences commonly charged
  5. How a criminal investigation begins
  6. The arrest process under PACE 1984
  7. Voluntary interview under caution
  8. What to do if HMRC contacts you criminally
  9. COP9 vs criminal investigation: the window to act
  10. Frequently asked questions

Civil vs criminal: the fundamental distinction

HMRC has two distinct routes when it suspects tax fraud. The first is civil: a Code of Practice 9 (COP9) enquiry, a section 9A Taxes Management Act 1970 enquiry or a discovery assessment. These proceedings are private, result in a financial settlement and carry no criminal record. The taxpayer is a subject of a revenue investigation, not a defendant in criminal proceedings.

The second is criminal. HMRC’s Fraud Investigation Service conducts its investigation using powers under the Police and Criminal Evidence Act 1984 (PACE 1984). Suspects may be arrested, property may be searched and seized and cases may be referred to the Crown Prosecution Service for charging. If charged and convicted, the consequences include imprisonment, a permanent criminal record and confiscation proceedings under the Proceeds of Crime Act 2002 (POCA).

The same underlying facts, a pattern of underdeclared income, offshore assets, fraudulent VAT returns, can lead to either route or, in some circumstances, both in sequence. HMRC makes an active strategic choice. That choice is governed by its published Criminal Investigation Policy and, crucially, can sometimes still be influenced in the very early stages of an investigation.

Key point: A civil tax investigation ends with a cheque. A criminal investigation can end with a prison sentence, a criminal record and a confiscation order calculated on the total “benefit” of your criminal conduct, which in tax cases is typically the gross amount evaded, not merely the profit. The two routes are not on the same spectrum: they are entirely different legal processes.

HMRC’s Criminal Investigation Policy

HMRC publishes its Criminal Investigation Policy. The policy states that HMRC will consider criminal investigation where there is “suspected serious fraud” and where criminal prosecution would be “in the public interest.” This two-stage test mirrors the Code for Crown Prosecutors, which the Crown Prosecution Service applies when making charging decisions.

The factors HMRC considers when determining whether the criminal route is appropriate include:

  • Amount of tax involved: higher amounts increase the likelihood of criminal referral, though there is no absolute financial threshold
  • Organised fraud: evidence of planning, multiple participants or deliberate concealment structures such as offshore companies or false invoicing
  • Abuse of position of trust: tax agents, insolvency practitioners or others who have used professional access to facilitate fraud
  • Previous non-compliance: a taxpayer who has previously been investigated civilly and agreed to comply, but has re-offended, is a strong candidate for criminal prosecution
  • Obstruction of civil investigation: deliberately misleading HMRC officers, destroying documents or providing false information during a civil enquiry
  • Deterrence value: HMRC uses high-profile prosecutions as a public deterrent and cases involving professionals or those in positions of public trust are more likely to be prosecuted for this reason

The policy is not a mechanical checklist, HMRC exercises judgment. But understanding these factors helps explain why two taxpayers with similar underlying conduct may face entirely different outcomes.

The Fraud Investigation Service (FIS)

HMRC’s Fraud Investigation Service is the specialist unit responsible for both serious civil investigations (COP9 cases) and criminal investigations. FIS handles:

  • Serious domestic tax fraud (income tax, corporation tax, capital gains tax)
  • Offshore evasion and overseas asset concealment
  • VAT fraud including Missing Trader Intra-Community (MTIC) fraud
  • Cybercrime and digital asset fraud (including cryptocurrency evasion)
  • PAYE and employer-level payroll fraud
  • Money laundering investigations with a tax dimension

FIS criminal investigators have the powers of a constable for the purposes of HMRC investigations. They can arrest under section 24 PACE 1984, execute search warrants, seize documents and electronic equipment and conduct interviews under caution. They work alongside specialist financial investigators who deal with asset tracing and the preparation of POCA confiscation schedules.

It is important to understand that FIS also handles COP9 civil cases. The same unit that handles criminal investigation handles the civil fraud investigation procedure. This means that if you receive a COP9 letter, you are already within the FIS system, but on the civil track. The question is whether that remains the case.

Criminal offences commonly charged

HMRC draws on a range of criminal offences when bringing tax prosecutions. The most commonly charged are:

  • Cheating the public revenue (common law): this ancient common law offence covers any dishonest act that deprives the Crown of revenue. It carries an unlimited sentence of imprisonment and an unlimited fine. It is used in the most serious cases because of its flexibility and the severity of the sentence available.
  • Section 106A Taxes Management Act 1970, fraudulent evasion of income tax: applies where a person is knowingly concerned in the fraudulent evasion of income tax. Maximum sentence: 7 years’ imprisonment.
  • Section 72 Value Added Tax Act 1994, VAT evasion: knowingly concerned in the fraudulent evasion of VAT. Maximum sentence: 7 years’ imprisonment. Commonly used in MTIC fraud and missing trader cases.
  • Section 1 Fraud Act 2006, fraud by false representation: where a taxpayer submits false returns or documents to HMRC. Maximum sentence: 10 years’ imprisonment.
  • Proceeds of Crime Act 2002, money laundering offences (ss327–329): acquiring, using, possessing, concealing or transferring criminal property. Maximum sentence: 14 years’ imprisonment. Can be charged alongside or separately from the underlying tax offence.

Multiple charges are common. A VAT fraud case may carry both section 72 VATA charges and POCA money laundering charges. Cheating the public revenue may be charged alongside Fraud Act offences. Each additional charge increases the complexity of the defence and the potential sentencing exposure.

How a criminal investigation begins

A criminal investigation rarely arrives without warning, though the warning signs are not always obvious. There are three common paths by which HMRC begins a criminal investigation:

Civil enquiry referred to FIS

An HMRC officer conducting a standard enquiry may identify patterns suggesting deliberate fraud rather than carelessness. The case is then referred internally to FIS for a “civil or criminal” determination. At this referral stage, the investigation is paused, you may notice your enquiry officer stops communicating. If FIS decides the criminal route is appropriate, the investigation restarts under criminal procedure.

Direct criminal referral

HMRC may receive intelligence directly that bypasses the civil route entirely. Sources include: Suspicious Activity Reports (SARs) from banks and accountants; third-party data such as Common Reporting Standard information from overseas tax authorities; tip-offs from former employees, business partners or ex-spouses; or data from partner agencies such as the National Crime Agency or SOCA successors.

Proactive HMRC intelligence

HMRC’s Connect system analyses billions of data points. Where the system flags significant discrepancies between reported income and lifestyle, property holdings or third-party data, FIS may open a proactive criminal investigation without any prior civil enquiry. In serious cases, the first overt act may be the execution of a search warrant.

The arrest process under PACE 1984

Arrest in an HMRC criminal investigation is made under section 24 PACE 1984, which permits a constable (or HMRC officer with constable powers) to arrest without a warrant where there are reasonable grounds to suspect a person has committed, is committing or is about to commit an indictable offence. Tax fraud is an indictable offence.

Following arrest:

  1. The caution is administered: “You do not have to say anything. But it may harm your defence if you do not mention when questioned something which you later rely on in court. Anything you do say may be given in evidence.”
  2. The suspect is taken to a designated police station (not an HMRC office) for detention
  3. Custody rights are explained by the custody sergeant: the right to have someone informed of arrest; the right to legal advice; the right to consult the PACE Codes of Practice
  4. Detention can initially be authorised for up to 24 hours; in serious fraud cases, a superintendent can extend this to 36 hours and a magistrates’ court can extend it further to a maximum of 96 hours
  5. Following interview under caution, the suspect is either released on bail, released under investigation (RUI) or charged and produced before a court
Do not waive your right to legal advice. Under PACE, you have an immediate and free right to consult a solicitor before being interviewed. Exercising this right cannot be used against you. Waiving it, even briefly, even “just to explain the situation”, is almost always a serious mistake. HMRC interviews are structured to elicit admissions. A solicitor’s presence changes the dynamic entirely.

Voluntary interview under caution

Arrest is not HMRC’s preferred opening move. More commonly, FIS will invite a suspect to attend a voluntary interview under caution (VIUC) at an HMRC office. The interview is “voluntary” in the sense that the suspect is not under arrest and is technically free to leave. But the caution applies in exactly the same way, the interview is fully recorded and the transcript can be put before a court in subsequent proceedings.

HMRC prefers voluntary interviews because they avoid the procedural requirements of PACE custody: no custody record, no independent custody sergeant, no formal time limits. The suspect may feel more relaxed and less guarded. This is precisely the environment in which damaging admissions are made.

If you receive an invitation to a voluntary interview under caution, you should treat it with the same seriousness as an arrest. Instruct a specialist solicitor immediately. Do not attend unrepresented. See our dedicated guide to voluntary interviews under caution for a full explanation of strategy and rights.

What to do if HMRC contacts you criminally

Whether you have been arrested, invited to a voluntary interview, had premises searched or simply suspect that HMRC is conducting a criminal enquiry into your affairs, the steps are the same:

  1. Instruct a criminal defence solicitor with tax expertise immediately. Not your general accountant, not a standard criminal law firm. You need someone who understands both the criminal procedure and the underlying tax law. Tax Dispute Consultants works alongside specialist criminal solicitors and can make introductions.
  2. Do not speak to HMRC without representation. Do not contact your HMRC officer to “clear things up.” Do not send letters, emails or documents without your solicitor’s approval.
  3. Do not destroy documents. Destroying documents after you know or suspect an investigation has begun is a separate criminal offence (perverting the course of justice or contempt). Preserve everything.
  4. Assess whether COP9 may still be available. If no arrest has been made and no criminal proceedings formally opened, there may still be a window to engage proactively with HMRC via the civil COP9 route. This window closes quickly and irreversibly, taking advice immediately is essential.

COP9 vs criminal investigation: the window to act

The relationship between COP9 and criminal investigation is not a simple binary. HMRC’s process for deciding which route to take takes time and during that period, specialist intervention can sometimes influence the outcome.

If HMRC has not yet arrested you, formally opened criminal proceedings or issued a caution, there is a possibility that proactive engagement through a specialist adviser could demonstrate that the civil route, COP9 and the Contractual Disclosure Facility, is the more appropriate outcome. This requires a frank assessment of the full extent of potential liability and a carefully structured approach to HMRC.

Once criminal proceedings formally begin, arrest, charge or a formal notification that HMRC is conducting a criminal enquiry, the COP9 route is closed. At that point, the only appropriate strategy is criminal defence. See our guide on COP9 vs criminal investigation for a detailed discussion of the fork and when each applies.

For cases that have reached the prosecution stage, our guide to the HMRC prosecution process explains what happens from charge to Crown Court and beyond. If your premises have already been searched, see our guide to HMRC dawn raids.

Related reading: Code of Practice 9 (COP9) explained , POCA and tax investigations , our Fraud Investigation Service.

Frequently asked questions

How do I know if HMRC is investigating me criminally?

HMRC will not typically notify you in advance of covert criminal enquiries. The first overt signs include: receipt of an invitation to a voluntary interview under caution; officers arriving with a search warrant; an arrest; or a formal letter stating that HMRC is conducting a criminal investigation. The absence of a COP9 letter in circumstances where you expected one, perhaps where you know HMRC has been enquiring into your affairs, can also indicate that HMRC has opted for the criminal route. If you have any reason to believe HMRC may be investigating you, specialist advice should be sought immediately rather than waiting for formal notification.

Can I still settle with HMRC if I am under criminal investigation?

Once criminal proceedings are formally under way, HMRC will not simultaneously offer a civil settlement for the same conduct. The two routes are mutually exclusive once the criminal file is open. However, if investigation is at an early stage and criminal proceedings have not formally commenced, there may still be a window to engage via COP9. If criminal charges are later dropped, because the CPS does not proceed or the public interest test is not met, HMRC will typically revert to civil proceedings to recover the underlying tax. Settlement at that stage remains possible, but the prospect of paying tax, interest and significant penalties remains regardless of whether prosecution proceeds.

What is the difference between HMRC civil and criminal investigation?

A civil HMRC investigation (whether a COP9 fraud enquiry, a section 9A enquiry or a discovery assessment) is conducted under tax legislation. It produces a financial outcome: additional tax, interest and penalties. There is no criminal record, no court appearance and the proceedings are private. A criminal investigation is conducted under PACE 1984. Suspects can be arrested and detained, premises can be searched and cases are referred to the Crown Prosecution Service for charging. If convicted, the consequences include imprisonment, a permanent public criminal record and confiscation proceedings under POCA 2002. The financial consequences of a criminal conviction can far exceed those of a civil settlement, due to the operation of the lifestyle assumptions under section 10 POCA.

What happens if HMRC decides not to prosecute?

If HMRC or the Crown Prosecution Service decides not to pursue criminal proceedings, because the evidence does not meet the required standard or prosecution is not in the public interest, the matter does not simply end. HMRC retains all its civil powers: assessment, penalty and recovery. It will typically reopen or commence a civil investigation to recover the underlying tax. In some circumstances, HMRC may at that stage offer a COP9 civil investigation as the route to settlement. A decision not to prosecute is not an amnesty, it simply means the consequences are civil rather than criminal.