Most HMRC investigations end in civil settlement, a financial agreement involving tax, interest and penalties. But where HMRC’s Fraud Investigation Service determines that criminal prosecution is appropriate, the process that follows moves through an entirely different set of rules, institutions and potential consequences. From referral to the Crown Prosecution Service, through charge, trial and the confiscation proceedings that follow conviction, understanding the prosecution pathway is essential for anyone facing or at risk of, a criminal tax case.
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HMRC’s prosecution role
HMRC’s Fraud Investigation Service (FIS) is the investigative body. It gathers evidence, conducts searches of premises, arranges voluntary interviews under caution and builds the prosecution case file. In England and Wales, HMRC then refers the file to the Crown Prosecution Service (CPS), the independent prosecuting authority, for the charging decision. HMRC does not decide unilaterally to prosecute; the CPS applies the Code for Crown Prosecutors and must agree that the case meets the required threshold.
In Scotland, cases are referred to the Crown Office and Procurator Fiscal Service (COPFS), which operates independently of the CPS. In Northern Ireland, the Public Prosecution Service (PPS) makes the equivalent decision.
In limited circumstances, HMRC retains the power to conduct its own prosecutions directly in England and Wales, but this is rare in serious fraud cases, which are almost universally handled by the CPS. For serious fraud with a wider organised crime dimension, the Serious Fraud Office (SFO) may take conduct of proceedings instead of the CPS.
The CPS charging decision
The CPS applies the two-stage test set out in the Code for Crown Prosecutors to every charging decision it receives from HMRC.
Stage one: the evidential test
Is there a realistic prospect of conviction? This is an objective test: would a properly directed jury, properly applying the law, be more likely than not to convict? If the evidence does not meet this threshold, the CPS must decline to charge, regardless of how serious the alleged conduct. The evidential test looks at the strength of witnesses, the reliability of documentary evidence and whether there are defences that might succeed.
Stage two: the public interest test
Even where the evidential test is met, prosecution must be in the public interest. In tax fraud cases, the public interest in prosecution is almost invariably present where the evidential test is met, tax fraud deprives public services of revenue and prosecution has a significant deterrence value. However, the public interest test is not a formality: HMRC’s own prosecution criteria overlay this stage with additional considerations specific to tax cases.
Public interest factors in HMRC cases
HMRC’s published prosecution criteria identify the following as factors favouring criminal prosecution:
- Amount involved: no absolute threshold, but cases typically involve six-figure tax losses; the higher the amount, the stronger the public interest
- Deliberate and systematic fraud: sustained over multiple tax years or involving complex concealment structures
- Abuse of position of trust: tax agents, accountants, solicitors and insolvency practitioners who have exploited professional access
- Organised criminal network: evidence that the taxpayer is part of a broader fraud scheme, such as MTIC VAT fraud or payroll fraud across multiple entities
- Previous civil settlements: a taxpayer who has previously made disclosures under COP9 or similar and then re-offended is a high-priority prosecution target
- Obstruction of civil investigation: providing false information, destroying evidence or misleading HMRC during a prior civil enquiry
- Deterrence effect: HMRC publishes details of successful prosecutions; cases involving well-known individuals or professionals carry particular deterrence value
Factors against prosecution include full and genuine cooperation, payment of all tax owed, advanced age or serious ill-health of the defendant and situations where prosecution would be disproportionate to the public benefit.
From charge to trial
Once the CPS authorises a charge, the process follows the standard criminal court pathway:
First appearance
The defendant appears before a magistrates’ court. Cheating the public revenue is an indictable-only offence and must be sent immediately to the Crown Court. Most serious tax fraud offences (section 106A TMA, section 72 VATA, Fraud Act 2006 offences) are either-way offences but are routinely committed to the Crown Court given their seriousness.
Plea and Trial Preparation Hearing (PTPH)
At the Crown Court, the defendant enters a plea. If guilty, the case proceeds to sentencing (sometimes at a separate hearing after preparation of pre-sentence reports). If not guilty, a trial date is set. Preparation directions are given: disclosure, service of evidence and any preliminary legal arguments.
CPIA 1996 disclosure
The Criminal Procedure and Investigations Act 1996 governs the prosecution’s disclosure obligations. The prosecution must serve all material that it relies on and must disclose all material that might reasonably be considered capable of undermining the prosecution case or assisting the defence. Defence teams in tax fraud cases frequently identify unused material, internal HMRC documents, civil investigation notes, officer correspondence, that is material to the defence. Unused material disclosure requests are a significant part of serious fraud defence work.
Jury trial
Tax fraud trials at the Crown Court are heard before a jury of twelve. They are typically complex and lengthy, trials involving offshore structures, multiple tax years or MTIC fraud chains can last weeks or months. The prosecution must prove each element of each charge beyond reasonable doubt.
Sentencing
Following conviction (whether by guilty plea or jury verdict), the Crown Court proceeds to sentencing. For tax fraud, the Sentencing Council’s guidelines for fraud offences apply and the court considers:
- Culpability: was the offending planned and sophisticated or more opportunistic? Did the defendant play a leading or lesser role?
- Harm: the amount of tax evaded or the amount at risk
- Aggravating factors: previous criminal convictions, abuse of position of trust, multiple victims, targeting of vulnerable individuals
- Mitigating factors: early guilty plea (one-third reduction if at first opportunity), genuine remorse, no previous convictions, personal circumstances
Maximum sentences: cheating the public revenue, unlimited; section 106A TMA 1970, 7 years; section 72 VATA 1994, 7 years; Fraud Act 2006 section 1, 10 years; POCA money laundering, 14 years. In practice, sentences for serious tax fraud run from community orders for the lowest-level cases to 8–10 years for the most serious, large-scale frauds.
POCA confiscation proceedings
A conviction for tax fraud is not the end of the financial consequences. Following sentencing, the prosecution will typically apply for a confiscation order under Part 2 of the Proceeds of Crime Act 2002.
Confiscation is mandatory in the Crown Court where the prosecution applies. The court determines:
- Whether the defendant has benefited from criminal conduct
- The value of that benefit (in tax cases, generally the amount of tax evaded; where criminal lifestyle assumptions apply, this can extend to all income and assets over six years)
- The defendant’s available amount (current assets)
- The confiscation order, which is the lower of benefit and available amount
The criminal lifestyle assumptions under section 10 POCA 2002 are particularly significant in tax fraud cases. Where a defendant has evaded tax across multiple years, which is routine in tax fraud prosecutions, they will almost invariably be found to have a criminal lifestyle, triggering the assumption that all assets and income over the preceding six years derive from criminal conduct. The defendant must then rebut each assumption on the balance of probabilities.
Failure to pay a confiscation order results in a default prison term (up to 14 years for orders over £1 million), which runs consecutively to any sentence for the underlying offence. For a detailed explanation of POCA confiscation in tax cases, see our guide to POCA and tax investigations.
Deferred Prosecution Agreements
Deferred Prosecution Agreements (DPAs) were introduced by Schedule 17 Crime and Courts Act 2013. They allow the CPS (with judicial oversight) to suspend criminal proceedings against a company on agreed terms, typically including payment of a substantial financial penalty, full cooperation and implementation of compliance reforms.
HMRC has used DPAs in corporate tax fraud cases where a company has come forward, cooperated fully and met the DPA criteria. DPAs offer companies a route to resolve serious fraud allegations without the reputational consequences of a conviction.
DPAs are not available to individual defendants. For individuals, the equivalent mechanism, avoiding prosecution through proactive disclosure, is the COP9 civil route, which must be engaged before criminal proceedings formally commence. See our guide to COP9 vs criminal investigation for a detailed analysis of when each route is available and how to influence which route HMRC chooses.
Can you still settle civilly once criminal proceedings are active?
Once criminal proceedings are formally active, a charge has been laid or HMRC has formally opened a criminal file, HMRC will not simultaneously pursue a civil settlement for the same underlying conduct. The civil and criminal routes are mutually exclusive once the criminal process begins.
However, there are important nuances:
- If prosecution is declined or discontinued by the CPS, the civil route reopens and HMRC will typically proceed to recover the tax through civil assessment and COP9 if appropriate
- A civil settlement offer made at a very early stage, before the criminal file is formally opened, can, in some circumstances, influence the public interest assessment; genuine proactive disclosure and payment demonstrate that the civil route will achieve an equivalent deterrence outcome
- Following conviction, confiscation proceedings run in parallel with (not instead of) any civil tax liability, though the courts will avoid pure double recovery where the same assets are concerned
For anyone who suspects HMRC may be investigating them but has not yet received a formal criminal notification, acting now to seek specialist advice may still preserve access to the COP9 civil route. Related reading: HMRC criminal investigation overview , COP9 explained , our Fraud Investigation Service.
Frequently asked questions
What sentence do people get for tax fraud?
Sentences for tax fraud vary considerably depending on the offence charged, the amount of tax involved, the defendant’s role and mitigating factors. Cheating the public revenue carries an unlimited sentence. Section 106A TMA 1970 and section 72 VATA 1994 each carry a maximum of 7 years; Fraud Act 2006 section 1 carries a maximum of 10 years. In practice, sentences range from community orders in minor cases to 8–10 years or more in the most serious, large-scale frauds. An early guilty plea at the first reasonable opportunity typically reduces sentence by one-third. POCA confiscation orders, which follow sentencing, can impose very substantial additional financial liability beyond the criminal sentence itself.
Can I avoid prosecution by paying what I owe?
Payment of the tax is a strong mitigating factor, but it does not automatically prevent prosecution once criminal proceedings are under way. HMRC and the CPS apply the public interest test, which takes into account deterrence, accountability and the seriousness of the conduct, not just financial recovery. In practice, full payment, full cooperation and genuine remorse are the most powerful mitigation available. At a very early stage, before a criminal file has formally been opened, proactive engagement via COP9, including payment of the tax, can support the case for the civil route. Once criminal proceedings are active, the decision on prosecution rests with the CPS, not HMRC.
What is confiscation and how is it calculated in tax fraud cases?
A confiscation order under Part 2 POCA 2002 is made by the Crown Court following conviction. The court determines the defendant’s “benefit” from criminal conduct, in a tax fraud case, this is generally the total tax evaded (the amount that should have been paid to HMRC). Where the criminal lifestyle assumptions under section 10 POCA apply (which they will where tax fraud is sustained over multiple years), the benefit figure can be expanded to cover all income, assets and expenditure over the preceding six years, unless the defendant proves each item had a legitimate source. The confiscation order is then set at the lower of the benefit figure and the defendant’s current available assets. Failure to pay on time results in a default prison sentence running consecutively to the main sentence.
Can a company receive a Deferred Prosecution Agreement for tax fraud?
Yes. Deferred Prosecution Agreements (DPAs) are available to companies under Schedule 17 Crime and Courts Act 2013. They allow a company to avoid criminal conviction by agreeing to fulfil conditions, typically including payment of a substantial financial penalty, full cooperation and compliance reforms. DPAs require judicial approval and are overseen by the court. HMRC has successfully concluded DPAs in corporate tax fraud cases. Individual defendants cannot receive DPAs, this route is available only to corporate entities. For individuals, the COP9 civil route is the equivalent mechanism for avoiding prosecution, but it must be engaged before criminal proceedings formally commence.