Criminal or civil? How HMRC deals with tax evasion

“Can you go to prison for tax evasion?” is often the first question people ask once they realise something in their past tax affairs may not stand up. The honest answer is that it is possible. But it is not HMRC’s usual response: most of its work against tax fraud uses its civil powers, and its published policy keeps criminal investigation for particular kinds of case.

This guide covers how HMRC chooses between the two routes, the main offences, and the signs that a matter has become criminal. We handle the civil side of HMRC investigations. We are not a criminal defence firm, and the guide says plainly where a criminal defence solicitor is needed.

Can you go to prison for tax evasion?

In principle, yes. Fraudulent evasion of income tax and of VAT each carry a maximum of 14 years’ imprisonment for offences committed on or after 22 February 2024, and the common law offence of cheating the public revenue carries a maximum of life imprisonment. Three points put that in proportion:

• Tax fraud requires dishonesty. HMRC’s Code of Practice 9 defines tax fraud as dishonest, deliberate behaviour, and says it cannot be committed by accident. A careless error is not tax fraud, however large. The offshore offences below are an important exception, because they do not require proof of intent.
• The civil route is HMRC’s starting point, as the next section explains.
• HMRC does not decide whether to prosecute. That decision is made by an independent prosecuting authority: the Crown Prosecution Service in England and Wales, the Crown Office and Procurator Fiscal Service in Scotland, or the Public Prosecution Service in Northern Ireland.

How HMRC decides between civil and criminal

HMRC’s criminal investigation policy, published on GOV.UK, starts from the civil route: fraud is to be dealt with through the civil procedures under Code of Practice 9 “wherever appropriate”. Criminal investigation is reserved for cases where HMRC needs to send “a strong deterrent message”, or where the conduct is such that only a criminal sanction is appropriate. HMRC also reserves “complete discretion” to investigate any case criminally. A briefing HMRC published in 2021 puts it more plainly: it uses criminal investigation where a fraud is particularly serious, to deter a type of fraud, and where its civil powers are not enough to establish the facts or recover the tax.

The policy gives examples of circumstances in which HMRC will generally consider a criminal rather than a civil investigation, and says the list is not exhaustive:

• organised criminal gangs attacking the tax system, and systematic frauds where the losses seriously threaten the tax base, including conspiracy
• an individual who holds a position of trust or responsibility
• materially false statements or documents provided during a civil investigation
• reliance on false or altered documents, or misrepresented facts, in pursuing an avoidance scheme
• suspected deliberate concealment, deception, conspiracy or corruption
• the use of false or forged documents
• importing or exporting in breach of prohibitions and restrictions
• money laundering, particularly by advisers, accountants, solicitors and other professionals
• previous offences, a repeated course of unlawful conduct, or previous civil action
• theft, or the misuse or unlawful destruction of HMRC documents
• assault on, threats to, or impersonation of HMRC officials
• a link to suspected wider criminality, in the UK or abroad, outside HMRC’s remit

Two further points in the policy matter. In deciding between COP9 and a criminal investigation, one factor is whether the taxpayer has made a complete and unprompted disclosure of the offences committed. And for some offences HMRC will not usually use the civil procedure at all; the policy names VAT “bogus” registration repayment fraud and organised tax credit fraud.

The Fraud Investigation Service runs both kinds of case

Code of Practice 9 opens by saying that it explains how HMRC’s Fraud Investigation Service (FIS) carries out civil investigations where HMRC suspects fraud. FIS also runs Code of Practice 8 investigations, which are civil and do not allege fraud. And FIS is one of only two HMRC directorates, with the Risk and Intelligence Service, whose authorised officers can use criminal investigation powers.

So a letter from FIS is not, by itself, a sign of a criminal investigation: COP8 and COP9 are both civil procedures. Nor are the two routes mutually exclusive. HMRC says a person can be under criminal investigation and subject to civil processes to assess and collect tax at the same time.

What Code of Practice 9 says about criminal investigation

HMRC issues Code of Practice 9 in selected cases where it suspects tax fraud. The code says that in many such cases HMRC carries out criminal investigations with a view to prosecution, and that under COP9 it offers instead the chance to make a full disclosure under a contract called the Contractual Disclosure Facility (CDF). It gives 60 days from receipt of the offer to accept or reject it. Entering the contract means admitting that deliberate behaviour has brought about a loss of tax.

What HMRC undertakes. If the person complies with the CDF’s terms, HMRC undertakes not to start a criminal investigation into the suspected frauds related to the deliberate behaviour they disclose. The code sets out the limits of that undertaking. It cannot bind other law enforcement agencies, such as the police, or regulatory bodies. It does not extend to other frauds or offences not committed against HMRC. And it applies only to the person under investigation, not to anyone else named or implicated in their disclosure.

When HMRC says it can still start a criminal investigation. Section 8 of the code lists the circumstances after the CDF has been offered:

• there is no response within 60 days, which HMRC treats as a decision to reject the offer
• the offer is rejected and HMRC’s suspicions of tax fraud are not satisfactorily allayed
• an acceptance letter is sent but no valid Outline Disclosure is made
• the Outline Disclosure is incomplete, in which case HMRC may investigate the frauds not disclosed; the code says those that were disclosed will not be criminally investigated by HMRC
• a false statement or document is submitted during the investigation
• the Formal Disclosure documents, such as the disclosure report and the Certificate of Full Disclosure, are incorrect or incomplete
• an admission of deliberate behaviour is later withdrawn without a good reason

The code also says that rejecting the offer is for someone who genuinely believes they have not brought about a loss of tax through deliberate behaviour, and that where HMRC verifies and accepts their explanation, it will confirm in writing that it no longer suspects them of tax fraud.

The main tax evasion offences and maximum sentences

These are the maximum sentences the law allows. They are ceilings, not an indication of what a court would impose in any particular case.

Cheating the public revenue, and fraud

Cheating the public revenue is a common law offence, tried only in the Crown Court; the Sentencing Council’s guideline for England and Wales gives its maximum as life imprisonment. COP9’s description of tax fraud includes behaviour that might be prosecuted as cheating, as a statutory evasion offence, or as fraud. The Fraud Act 2006 applies in England, Wales and Northern Ireland.

Fraudulent evasion of income tax and of VAT

A person commits an offence under section 106A of the Taxes Management Act 1970 if they are knowingly concerned in the fraudulent evasion of income tax, by themselves or anyone else. Section 72 of the Value Added Tax Act 1994 is the VAT equivalent, and also covers false VAT documents and statements. The Finance Act 2024 raised the maximum prison term for both from 7 to 14 years, for offences committed on or after 22 February 2024; earlier offences keep the 7-year maximum. Both can also be tried in a magistrates’ court, where the limits are much lower.

The offshore offences

Sections 106B to 106D of the Taxes Management Act 1970 apply from the 2017-18 tax year. They cover three failures where the tax relates to offshore income, assets or activities: not notifying HMRC of being chargeable, not filing a return, and filing an inaccurate return that is not corrected in time. HMRC’s guidance says they “do not require proof of intent”, and HMRC describes them as strict liability offences. But they are narrow:

• they apply only to income tax and capital gains tax
• they apply only where the offshore tax involved for a tax year exceeds a threshold, set by regulations at £25,000
• broadly, offshore income and gains reported to HMRC under the Common Reporting Standard do not count towards that threshold
• there is a defence of reasonable excuse for not notifying or not filing, and of reasonable care for an inaccurate return
• trustees of a settlement and personal representatives, acting in that capacity, are excluded

They are tried only in a magistrates’ court. HMRC’s guidance gives the maximum as 6 months’ imprisonment and an unlimited fine in England and Wales, and 6 months and a fine of up to £5,000 in Scotland and Northern Ireland.

Failure to prevent the facilitation of tax evasion

Part 3 of the Criminal Finances Act 2017 created offences that only a company or partnership can commit. It is guilty if a person associated with it (an employee, an agent, or anyone else performing services for or on its behalf) commits a tax evasion facilitation offence while acting in that capacity. Section 45 covers UK tax evasion; section 46 covers foreign tax evasion where there is a UK connection. The defence is to prove that the body had the prevention procedures it was reasonable in all the circumstances to expect. The penalty is a fine, with no upper limit set by the Act on conviction on indictment.

Signs that a matter is criminal rather than civil

A civil investigation works mainly in writing: compliance check letters, information notices, and COP8 and COP9 letters. None of those is a criminal step in itself. The following are different, and each belongs to a criminal investigation:

• An invitation to an interview under caution. In England and Wales, the questioning of suspects is governed by the Police and Criminal Evidence Act 1984 (PACE) and its codes of practice, which HMRC’s criminal investigators must have regard to. A suspect must be cautioned before being questioned about an offence where the answers may be given in evidence in a prosecution. The caution begins: “You do not have to say anything.” Someone attending a voluntary interview must be told that they are not under arrest, are not obliged to stay, and can have free and independent legal advice.
• A search warrant. HMRC can apply for and execute search warrants.
• Arrest. HMRC has its own powers of arrest for HMRC offences, used only by trained and authorised officers.
• Production orders. HMRC can apply for orders requiring information to be produced.

Scotland and Northern Ireland have their own legislation for these powers, but the point is the same.

Where an accountant fits

Linx Tax Defence is an accountancy practice. We handle the civil side of HMRC enquiries, investigations and disclosures. We do not represent anyone in a criminal investigation or prosecution. Where a matter is criminal, or could become so, the criminal solicitor leads, and the work an accountant can do alongside them is the civil and numerical side:

• Quantifying the tax. Working out from the records, year by year, what was under-declared, and the tax, interest and potential penalties that follow.
• The civil disclosure. Under COP9, helping to prepare the disclosure report and its supporting calculations to the standard the code requires; outside COP9, preparing a voluntary disclosure.
• Working with the solicitor. Where civil and criminal processes run side by side, making sure nothing goes to HMRC’s civil side without the criminal position having been considered.

There is also a legal reason for the solicitor to lead. Legal advice privilege protects communications between a client and their lawyers, and in 2013 the Supreme Court decided that it does not extend to advice from accountants, even on tax law. In a matter that is or might become criminal, how advice is sought and recorded can matter, and that is a judgement for the solicitor. We will tell you plainly if a matter belongs with a criminal solicitor, or needs both.

What to do next

If you have been arrested, searched or invited to an interview under caution, a criminal defence solicitor comes first.

If a COP8 or COP9 letter has arrived, you are in a civil procedure, and the letter’s deadline matters. See COP9 investigations or COP8 investigations. If you are not sure what HMRC has sent, or whether it is looking at your affairs at all, see our guide to the signs HMRC is investigating you.

If nothing has arrived, but you know something was more than a mistake, a complete and unprompted disclosure is one factor HMRC weighs, not a guarantee. A voluntary disclosure is one route. Where the conduct was deliberate, a person can also ask HMRC to consider them for the CDF using form CDF1, without waiting to be contacted; HMRC does not have to offer a contract, and cannot if the person is already involved in a criminal investigation. Which route fits is a decision to make with advice.

How a disclosure is made can also affect whether HMRC can publish your details as a deliberate defaulter: see our guide to HMRC’s deliberate tax defaulters list. Or send us a message.

Sources

• HMRC, “HMRC’s criminal investigation policy” and “HMRC’s criminal investigation powers and safeguards” (GOV.UK, both last updated 13 July 2021)
• HMRC, “HMRC’s approach to tax fraud”, issue briefing (GOV.UK, 2 December 2021)
• HMRC, Code of Practice 9 from 14 June 2023, and “Admit tax fraud to HMRC using the Contractual Disclosure Facility” (GOV.UK, last updated 16 September 2024)
• HMRC, “HMRC’s Fraud Investigation Service: technical note”, annual report and accounts 2025 to 2026 (GOV.UK)
• Taxes Management Act 1970, sections 106A to 106G; Value Added Tax Act 1994, section 72; Finance Act 2024, section 32; Fraud Act 2006, section 1
• The Sections 106B, 106C and 106D of the Taxes Management Act 1970 (Specified Threshold Amount) Regulations 2017 (SI 2017/988); HMRC, “Offences relating to offshore income, assets and activities” (GOV.UK, last updated 13 September 2023)
• Criminal Finances Act 2017, Part 3 (sections 44 to 46)
• Sentencing Council, Revenue fraud guideline (England and Wales)
• Police and Criminal Evidence Act 1984, section 67(9), and PACE Code C (October 2023)
• R (Prudential plc) v Special Commissioner of Income Tax [2013] UKSC 1

This guide is general information, not advice on any particular case.