An Inspector calls: the new HMRC investigation regime

Posted: September 27, 2007

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Introduction

1. After a fairly detailed consultation process,  Finance Act 2007 changed the powers available to HMRC in relation to investigating certain criminal offences. The need for amendment arose because of the unification of the Inland Revenue and Customs and Excise in 2005.  Before unification, the two departments had different powers of investigation. Following their combination into a single body, it was regarded as anomalous for powers of investigation to depend on whether the offence being investigated was a Revenue or a Customs offence. So the new regime lays down a single set of powers that may be exercised where a Revenue and Customs offence is suspected.

2. The changes have been effected by amending the Criminal Law (Consolidation) (Scotland) Act 1995  ('the 1995 Act'). Sections 24 to 26 of the 1995 Act previously governed powers of detention and questioning granted to Customs & Excise.

3. Broadly speaking, a 'Revenue and Customs offence' is an offence in relation to any matter for which HMRC has any functions.

4. Perhaps not surprisingly, the general approach taken has been to extend the more restrictive powers of the former Inland Revenue by giving the new body the more extensive powers formerly conferred on Customs & Excise.

5. But it should be emphasised that the relevant provisions of FA 07 have not yet been brought into force, and it is at the moment not clear when they will be.

6. It should also be noted that if an act under the new provisions is invalid, for example a production order has not been properly obtained, it is important to challenge this before HMRC obtains any evidence. This is because the fact that evidence is obtained illegally is not necessarily enough to make it inadmissible: it depends whether, in all the circumstances, allowing the Crown to rely upon it would be unfair.  This applies even where the illegality constitutes a breach of one's human rights.  Moreover, any evidence obtained can be used in prosecuting any other crime,  again whether or not the evidence has been obtained legally. So it is important to know the rules and to act as soon as HMRC seeks to do anything it has no power to do, rather than wait until trial and hope for success in arguing that evidence is inadmissible. 7. The new powers can be sub-divided into four categories, namely production orders, entry and search warrants, detention and questioning, and arrest. I shall consider each of these in turn.

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