Fraud Investigation Service

What Is HMRC's Fraud Investigation Service?

HMRC's Fraud Investigation Service (FIS) is the elite investigation arm responsible for tackling the most serious cases of tax fraud in the United Kingdom. FIS brings together highly trained investigators, forensic accountants and intelligence analysts whose sole focus is detecting, investigating and prosecuting individuals and businesses suspected of deliberate tax fraud.

If you have been contacted by HMRC's Fraud Investigation Service, it means that HMRC considers your case to be among the most serious it handles. This is not a routine compliance check – it is a targeted investigation that could result in substantial financial penalties, criminal prosecution, or both.

Key Teams Within FIS

The Fraud Investigation Service is organised into several specialist teams, each focused on a different area of tax fraud:

FIS Prosecutions

This is the largest team within FIS, employing approximately 600 investigators across the UK. The prosecutions team handles cases where HMRC intends to pursue criminal charges against individuals or businesses. These investigators have the power to conduct searches, seize documents, arrest suspects and work with the Crown Prosecution Service to bring cases to court.

Offshore Tax Investigations

This specialist team focuses on taxpayers who have used offshore structures, accounts or trusts to hide income or assets from HMRC. With the global exchange of financial information now well established, HMRC has access to vast amounts of data about UK taxpayers' overseas holdings, making offshore evasion increasingly difficult to conceal.

UK Tax Fraud Investigations

This team handles domestic tax fraud cases that do not involve offshore elements. Their work covers a wide range of fraudulent activity, from organised VAT fraud and payroll fraud to individuals who have systematically under-declared their income over many years.

Task Forces

HMRC regularly deploys task forces to target specific industries, geographical areas or types of fraud. These task forces combine the expertise of FIS investigators with data from HMRC's intelligence systems to conduct concentrated campaigns against suspected fraud in targeted sectors.

How Does FIS Investigate?

The Fraud Investigation Service uses a range of sophisticated methods to detect and investigate tax fraud:

• Financial data analysis – FIS analysts examine bank records, financial statements and transactional data to identify discrepancies between declared income and actual financial activity
• Land Registry data – property ownership records are cross-referenced with tax returns to identify undeclared income from property transactions or rental income
• Data mining – HMRC uses advanced data mining techniques to sift through vast quantities of information from multiple sources, including third-party data, to identify patterns consistent with tax fraud
• Artificial intelligence and risk assessment – HMRC's Connect system uses AI and machine learning to analyse billions of data points, flagging high-risk taxpayers for investigation based on patterns of behaviour that suggest fraud or evasion
• International information exchange – through the Common Reporting Standard and other agreements, HMRC receives financial data about UK taxpayers from tax authorities around the world

Code of Practice 8 vs Code of Practice 9

When FIS opens an investigation, it will typically be conducted under one of two codes of practice. Understanding which code applies to your case is essential, as the implications are very different.

Code of Practice 8 (COP8)

Code of Practice 8 applies where HMRC suspects that tax has been lost through avoidance, negligence or a failure to take reasonable care, but does not suspect deliberate fraud. A COP8 investigation is serious, but it is civil in nature – meaning it will not result in criminal prosecution. The focus is on establishing the correct tax position and recovering any tax that is due, along with interest and penalties.

Penalties under COP8 can range from 0% to 100% of the tax due, depending on the circumstances and the level of cooperation you provide during the investigation.

Code of Practice 9 (COP9)

Code of Practice 9 is reserved for cases where HMRC suspects deliberate tax fraud. A COP9 investigation is the most serious type of civil investigation that HMRC can conduct. Under COP9, HMRC offers the taxpayer the opportunity to make a full disclosure under the Contractual Disclosure Facility (CDF).

By signing the CDF, you agree to make a complete and honest disclosure of all your tax irregularities. In return, HMRC undertakes not to pursue criminal prosecution for the matters you disclose, provided the disclosure is full, complete and accurate. However, if you decline the CDF or fail to make a full disclosure, HMRC may refer your case for criminal investigation.

What Should You Do If Contacted by FIS?

Being contacted by HMRC's Fraud Investigation Service is an extremely serious matter. The actions you take in the immediate aftermath can have a profound impact on the outcome of your case. Here is what we recommend:

1. Seek specialist advice immediately – do not attempt to deal with FIS on your own. Contact us as soon as possible so we can assess your situation and advise you on the best course of action. Time is critical.
2. Preserve all records – do not destroy, alter or dispose of any documents, digital records or financial information. Destroying evidence is a criminal offence and will make your situation significantly worse.
3. Do not contact HMRC directly – anything you say to HMRC can be used against you. Let us handle all communications on your behalf to ensure your rights are protected.
4. Prepare for meetings – if HMRC has requested a meeting, do not attend without professional representation. Our specialists will prepare you thoroughly, attend with you and ensure that the meeting is conducted fairly.
5. Engage early – the earlier you engage with the investigation process through specialist representation, the more options will be available to you. Early cooperation, properly managed, can significantly reduce penalties and in many cases avoid criminal prosecution altogether.

An FIS investigation is one of the most serious situations any taxpayer can face. With the right specialist support, however, it is possible to achieve the best possible outcome. Contact us today for an urgent, confidential consultation.