{"id":2850,"date":"2026-08-24T01:58:21","date_gmt":"2026-08-24T01:58:21","guid":{"rendered":"https:\/\/taxinvestigation.co\/new\/?p=2850"},"modified":"2026-08-24T01:58:24","modified_gmt":"2026-08-24T01:58:24","slug":"assess-all-the-risks","status":"publish","type":"post","link":"https:\/\/taxinvestigation.co\/new\/assess-all-the-risks\/","title":{"rendered":"Assess all the risks"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Helen Pearson and Lucy Ryczany examine the crossover between HMRC investigations, the Crown Prosecution Service and SFO investigations and prosecutions<\/em>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For many businesses, a tax investigation is still viewed as a regulatory or civil dispute with HMRC. Historically, that perception was often correct. Issues concerning PAYE, VAT, off-payroll working, R&amp;D claims, transfer pricing or tax avoidance arrangements would typically be resolved through enquiries, assessments, penalties and, occasionally, litigation before the tax tribunals.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, the UK\u2019s corporate crime landscape has changed significantly. The introduction of the corporate criminal offence of \u2018failure to prevent the facilitation of tax evasion\u2019 under the Criminal Finances Act 2017, together with the \u2018failure to prevent fraud\u2019 offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), means conduct identified during a tax investigation can now create much wider criminal and governance risks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">As enforcement agencies increasingly share intelligence and regulators focus on corporate culture, businesses can no longer assume that a tax dispute will remain solely a tax dispute. What begins as an HMRC enquiry may evolve into a criminal investigation involving HMRC\u2019s Fraud Investigation Service or end up in the hands of the Crown Prosecution Service (CPS) or the Serious Fraud Office (SFO).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Tax investigations and corporate crime<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">While a routine tax investigation by HMRC is typically focused on civil liabilities, HMRC often run criminal investigations through their specialist Fraud Investigation Service (FIS) using their specialist criminal investigatory powers. HMRC\u2019s primary objective is the recovery of unpaid tax, interest and penalties, but they now investigate significant numbers of criminal cases. HMRC\u2019s criminal investigation policy states that it will deploy its criminal investigation powers in cases \u201cwhere HMRC needs to send a strong deterrent message, or where the conduct involved is such that only a criminal sanction is appropriate\u201d.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">By contrast, the CPS brings prosecutions against individuals and corporate entities for various criminal offences, including fraud, corruption and economic crimes, typically on behalf of the police. Their focus is on bringing criminals to justice, prosecuting where there is sufficient evidence and where a prosecution is in the public interest. Their activity acts as a strong deterrent against wrongdoing, particularly for corporate crime.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The SFO is an independent government body solely specialising on fighting large-scale or complex fraud, again involving significant public interest considerations. It has both investigatory and prosecutory aims, bringing together highly specialised teams of individuals including investigators, lawyers and accountants.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Modern tax investigations frequently involve allegations of dishonesty, false documentation, sham arrangements, concealed income streams, payroll manipulation, fraudulent VAT claims or the misuse of corporate structures. Fundamentally, in each of these instances, a criminal offence occurs. These issues often overlap with offences under the Fraud Act 2006 and other economic crime legislation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The result is that tax misconduct is often viewed through a broader economic crime lens rather than simply as a matter of tax compliance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Failure to prevent tax evasion<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A major step towards convergence of each of these matters came with the Criminal Finances Act 2017.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sections 45 and 46 introduced strict liability corporate criminal offences where an organisation fails to prevent an associated person from criminally facilitating UK or foreign tax evasion. The legislation applies to employees, agents, contractors and others providing services on behalf of the organisation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Significantly, prosecutors do not need to demonstrate that directors were aware of the conduct. The key question is whether the organisation had reasonable prevention procedures in place. If not, the business may face prosecution regardless of senior management knowledge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The legislation transformed tax compliance into a corporate crime issue. Boards were required not only to consider tax risk but also to implement governance, training, due diligence and monitoring procedures capable of preventing criminal facilitation of tax evasion.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">HMRC\u2019s recent decision to commence its first corporate prosecution under these provisions suggests the offences are no longer merely theoretical.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Failure to prevent fraud<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The \u2018failure to prevent fraud\u2019 offence under ECCTA along with the introduction of the Crime and Policing Act 2026 takes the trend significantly further.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From 1 September 2025, large organisations could be held criminally liable where an employee, agent, subsidiary or other associated person commits a specified fraud offence intending to benefit the organisation and the organisation lacks reasonable fraud prevention procedures.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Importantly, several fraud offences capable of triggering liability may arise directly from tax-related conduct, including:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 dishonest misrepresentations made to HMRC;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 failures to disclose information to HMRC;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 false accounting;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 false statements by company directors;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 fraudulent trading; and<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 cheating the public revenue.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Senior managers regime<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Under s196, ECCTA sought to the common law position as a step towards broadening the scope of corporate liability by attributing liability to the corporate in circumstances where specific financial crime offences had been committed by senior managers.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Crime and Policing Act 2026 broadens this even further. From 29 April 2026, organisations will be criminally liable where a senior manager commits any criminal offence in the UK while acting within the actual or apparent scope of their authority.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For advisers and businesses, this means that concerns uncovered during a tax audit may now trigger broader questions regarding fraud prevention frameworks, corporate governance and criminal liability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Threshold for fraud<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Not every tax dispute creates criminal exposure. There remains a distinction between technical disagreements with HMRC, careless inaccuracies and deliberate or dishonest conduct.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The crossover typically arises where HMRC identifies evidence suggesting intentional deception, such as fabricated invoices or manipulated accounting records.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Within the tax investigations sphere, this has often been considered to be akin to \u2018deliberate\u2019 or \u2018deliberate and concealed\u2019 behaviours for the penalties regime in Schedule 24 of the Finance Act 2007. The meaning of a \u2018deliberate inaccuracy\u2019 has been considered by the Courts and Tax Tribunals on many occasions, but broadly requires a statement to be made with an intention to mislead HMRC or potentially recklessness as to the as to whether it would do so, as held by the Supreme Court in HMRC v Tooth [2021] UKSC 17.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Once dishonesty becomes a credible issue, HMRC may deploy its specialist criminal investigation resources. In sufficiently serious cases, the facts may also engage broader fraud offences extending beyond tax legislation. At this stage, what began as a tax enquiry can rapidly become an economic crime investigation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Where do the CPS and SFO fit in?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Whilst the tax investigation will be conducted by HMRC, the decision to bring a criminal prosecution for criminal offences involving tax is made by the CPS. By contrast, the SFO investigates and prosecutes its own cases, being large scale, serious or complex fraud often involving substantial financial harm, sophisticated structures or significant public interest concerns.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Although many tax matters remain within HMRC\u2019s remit, there are circumstances where the underlying conduct extends beyond tax compliance issues alone.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Examples may include:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 large-scale payroll fraud;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 fraudulent tax credit schemes;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 organised VAT fraud;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 accounting manipulation affecting investors;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 cross-border structures involving multiple jurisdictions;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 conduct linked to bribery, corruption or money laundering.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From an enforcement perspective, authorities increasingly focus on the entirety of the misconduct rather than the regulatory label attached to it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Accordingly, a tax issue may become relevant evidence within a broader fraud investigation, and a fraud investigation may reveal previously unidentified tax offences.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Importance of corporate culture<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A consistent theme across modern economic crime legislation is the importance of corporate culture and governance. \u2018Failure to prevent tax evasion\u2019, \u2018failure to prevent fraud\u2019 and \u2018failure to prevent bribery\u2019 all share a common principle: organisations are expected to take proactive steps to prevent misconduct.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The focus is no longer limited to whether wrongdoing occurred. Regulators increasingly ask:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Was the risk identified?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Were controls implemented?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Were employees trained?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Were third parties subject to due diligence?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Were concerns escalated and investigated?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 Did senior management genuinely promote ethical conduct?<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Self-reporting and cooperation<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Another area where tax investigations and fraud investigations increasingly overlap is the treatment of self-reporting and cooperation. Both the CPS and the SFO consider active steps taken towards preventing criminal offences, or genuine self-reporting of misconduct, as mitigating factors in a prosection. A prompt self-report can also enable an entity to agree a Deferred Prosecution Agreement (DPA) with either the CPS or SFO.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, the SFO\u2019s 2025 Corporate Cooperation Guidance makes clear that prompt self-reporting and genuine cooperation are significant factors when considering whether a Deferred Prosecution Agreement (\u201cDPA\u201d) may be appropriate rather than prosecution. Consequently, businesses identifying serious tax-related misconduct must now assess issues extending well beyond tax liability, including:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 potential criminal exposure;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 preservation of legal privilege;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 internal investigations;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 regulatory notifications;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 self-reporting obligations; and<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2022 remediation measures.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These decisions often need to be taken at a very early stage, sometimes before HMRC or other authorities become aware of the issue.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Modern legislation reflects a clear policy objective that organisations must take active responsibility for preventing economic crime within their business. Tax misconduct is increasingly viewed not merely as a compliance failure but as a potential indicator of wider fraud risks and governance weaknesses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the current enforcement environment, the question is how quickly a seemingly routine tax enquiry can expose an organisation to a much broader criminal investigation, possibly involving multiple agencies.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For businesses, the key lesson is straightforward.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A tax investigation should not be assessed solely through the prism of tax liabilities and penalties. Boards and advisers must also consider potential Failure to Prevent offences, fraud exposure, criminal enforcement risks and the expectations of agencies such as HMRC, the CPS and the SFO from the outset.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>\u2022 Helen Pearson and Lucy Ryczany are Senior Associates at Brabners, based in Leeds<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Helen Pearson and Lucy Ryczany examine the crossover between HMRC investigations, the Crown Prosecution Service and SFO investigations and prosecutions. For many businesses, a tax investigation is still viewed as a regulatory or civil dispute with HMRC. Historically, that perception was often correct. Issues concerning PAYE, VAT, off-payroll working, R&amp;D claims, transfer pricing or tax [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2851,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-2850","post","type-post","status-publish","format-standard","has-post-thumbnail","category-august-september-2026-issue"],"_links":{"self":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/comments?post=2850"}],"version-history":[{"count":1,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2850\/revisions"}],"predecessor-version":[{"id":2852,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/posts\/2850\/revisions\/2852"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/media\/2851"}],"wp:attachment":[{"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/media?parent=2850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/categories?post=2850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxinvestigation.co\/new\/wp-json\/wp\/v2\/tags?post=2850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}