The latest Finance Bill amendments correct some technical errors and include a few helpful changes to the Temporary Repatriation Relief.
The Finance Bill 2025 Report Stage amendments were published mid-afternoon on Tuesday 25 February. The Committee Stage amendments had been somewhat lacklustre – but following inviting comments around the Temporary Repatriation Relief (TRF) made by the Chancellor at the World Economic Forum at Davos, hopes were high for some softening of the changes to the taxation of non-UK domiciled individuals to stem the surge of wealth leaving the UK.
The relevant Report Stage amendments can be found at: Gov 5 to Gov 17 (13 in total) and then Gov 21 to Gov 66 (46 amendments). There is no substantive change in policy, the adjustments instead largely correct technical drafting oversights.
Mercifully, the changes made in Sch 9 para 5 to the definition of ‘remitted to the UK’ will no longer render cash in an offshore bank account ‘remitted’ to the UK by default! In addition, it seems that capital payments/benefits from any TCGA 1992 s 89 so-called migrant settlements will be able to benefit from the TRF where matching is to pre-6 April 2025 income or gains.
Meaning of ‘remitted to the UK’: The Report Stage amendments fortunately alleviate concerns that money in non-UK bank accounts will result in inadvertent remittances, however, there is still significant concern with respect to the other extensions to the meaning of ‘remitted to the UK’. The ICAEW and CIOT both called for Sch 9 para 5 to be withdrawn in full, but this has not happened. In the absence of clearly drafted legislation, it seems inevitable that the impending issued HMRC guidance will come to be heavily relied on in this arena which in turn creates significant uncertainty and difficulty for those affected who are trying to structure their affairs.
Trust legislation: Various technical amendments (Gov 50 to Gov 55) have been made to Sch 12 which governs the treatment of trust income/gains under the new rules. The technical adjustments hopefully ensure that trust pooling works as intended.
TRF amends: The TRF amendments are contained at Gov 28 to 49 (22 in total). The changes make helpful changes to the way that the TRF will operate. Specifically:
Conclusion: The great speed with which the Government is acting to abolish a long-established set of tax rules will inevitably mean that errors will be made. It is hoped that the changes on the horizon in relation to the personal offshore anti-avoidance legislation (the call for evidence having closed on 19 February) receive adequate consultation and are not also enacted with such haste.
Original article can be found here: Finance Bill Report Stage amendments to the non-dom reforms (taxjournal.com)
We are happy to announce that JHA's Tax Disputes Team has been ranked as Band 1 by Chambers Global today. A special congratulations to our lawyers who also received individual recognition: Graham Aaronson KC (Band 1), Michael Anderson (Band 2) Iain MacWhannell (Band 4) and Paul Farmer (Senior Statespeople).
This is the latest successful ranking, following previous top-tier rankings in Legal 500 United Kingdom 2025, Chambers UK 2025 and Chambers High Net Worth Guide 2024.
Helen McGhee TEP, Elizabeth Dean and Megan Durnford consider HMRC’s ever-expanding criminal investigation powers
The number of civil investigations opened by His Majesty’s Revenue and Customs’ (HMRC’s) Offshore Corporate and Wealthy team more than doubled between 2021/2022 and 2022/2023, rising from 284 to 627 respectively.[1]
The number of Crown Prosecution Service decisions to bring criminal charges rose 80 per cent over the same period, going from 46 to 83.[2]
HMRC has extensive powers to support this increasingly aggressive approach taken to noncompliance.
Should His Majesty’s Revenue and Customs (HMRC) decide to start a criminal investigation, the powers already available to its authorised officers are expansive.
Search warrants
It is not just the police who can carry out ‘dawn raids’. HMRC too, with a warrant granted by a magistrates’ court, can enter one’s property unannounced, often early in the morning, to collect evidence to further an investigation into HMRC-related offences. During the search, HMRC can seize any material to which the warrant relates. Although HMRC cannot use certain documents (those protected by legal professional privilege, for example), it can take months for an independent barrister to determine which of the material seized falls within that limited category. It may be possible to challenge the legality of the search warrant itself, and so the retention and/or use of any documents seized by HMRC, or to argue that the seized material falls outside the scope of the warrant.
Orders and notices
Production orders and disclosure orders/notices are useful instruments in HMRC’s toolkit as they grant HMRC the ability, when conducting investigations into particular offences, to compel those subject to the order or notice (often third parties such as banking staff or accountants) to provide specified material and/or information, including by answering questions relevant to the investigation in an interview with HMRC. Compliance with such orders is compulsory and non-compliance is an offence punishable by a fine and/or imprisonment. HMRC must apply for a production order in the Crown Court. Representations can be made at that hearing on behalf of the individual or company to argue that the proposed terms of the order are too broad in scope. Moreover, the individual or company which is required to produce material and/or information in response to the production order or disclosure order/notice is often given only seven days to comply. It may be possible to negotiate with HMRC to extend time for compliance where that task is particularly onerous.
Arrest
HMRC’s powers of arrest may only be used in relation to HMRC-related offences and in circumstances where the authorised officer has reasonable grounds for believing that it is necessary to arrest the person in question. The consequences of doing so can be far-reaching, for example, the US will often reject visa applications from persons who have been arrested. In addition, HMRC can search suspects and premises following an arrest. Voluntarily attending an interview under caution will normally negate the necessity of an arrest. However, obtaining specialist legal advice is critical in deciding whether to attend an interview voluntarily and, if so, whether to answer HMRC’s questions in full, answer ‘no comment’, or provide a written statement prepared in advance.
Recovery of assets
HMRC can recover criminal assets through the Proceeds of Crime Act 2002.
Accessing data
HMRC can apply to the Court to use intrusive surveillance powers in the context of serious crime. This does not mean however, that one’s data is off limits in any other instance. As HMRC’s criminal investigation policy makes clear,[3] ‘HMRC may observe, monitor, record and retain internet data which is available to anyone.’ This is known as ‘open source’ material and includes blogs and social networking sites where no privacy settings have been applied. We are living in an increasingly digital age and as a result, HMRC have access to a plethora of information on any given individual.
A Code of Practice 9 (COP9) is a process whereby a person whom HMRC suspects is guilty of tax fraud is given the opportunity to make a disclosure setting out the background/reasons for any noncompliance and make good any potentially unpaid tax. In exchange, subject to some exceptions, HMRC will formally agree not to open a criminal investigation. This agreement is called the Contractual Disclosure Facility (CDF).
The HMRC COP9 guidance was substantially altered in 2023.[4] One change of particular note was the broadening of the definition of tax fraud. Under the previous COP9 guidance,[5] tax fraud was defined by HMRC as ‘dishonest behaviour that led to or was intended to lead to a loss of tax’. Under the new COP9 guidance,[6] however, this was extended to ‘dishonest behaviour that led to or was intended to lead to a risk of loss of tax’. Taxpayer behaviour may fall within this definition even if the fraud is in respect of tax owed by another, even if the individual does not personally make any gain. HMRC’s definition of ‘tax fraud’ for the purposes of COP9 is slightly different to when it is being prosecuted as a criminal offence. For example, a person will be guilty of fraud by false representation if they dishonestly make a false representation and intends, by making that representation, to make a gain for themselves or another, or to cause loss to another or to expose another to a risk of loss.
It is HMRC’s policy to deal with fraud by use of the cost-effective civil fraud investigation procedures under COP9 ‘wherever appropriate’. HMRC intends to reserve criminal investigations ‘for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.’ When deciding between COP9 or a criminal investigation, HMRC’s criminal investigation policy also confirms one factor will be whether the taxpayer has made a complete and unprompted disclosure of the offences committed.[7] In cases of non-compliance, following a COP9 route will almost always be preferable, particularly given the broad powers available to HMRC in a criminal investigation and the risk of conviction and a potential sentence of imprisonment following a criminal prosecution.
New criminal offence: failure to prevent fraud
The new ‘failure to prevent fraud’ corporate offence is expected to come into force in the first half of 2025. Specifically, the new offence will be committed if one of the relevant body’s associated persons commits a specified type of fraud intending to benefit, directly or indirectly, the relevant body or a person to whom services are provided on its behalf. Although it only applies to large organisations, this new offence has a broader scope than the similar ‘failure to prevent the facilitation of tax evasion’ offence created under the Criminal Finances Act 2017 (the Act). The definition of the relevant body’s associated persons is wider including:
Unlike the mentioned offence under the Act, HMRC will not need to prove that the subsidiary was performing a service on behalf of the relevant body.
Expansion of DPAs
A deferred prosecution agreement (DPA) is an agreement, approved by a court, between either the Crown Prosecution Service (CPS) or the Serious Fraud Office (SFO) and an offending company, as an alternative to prosecution. Under the agreement, the corporate defendant will agree to certain conditions (such as payment of a financial penalty) and the prosecuting agency agrees to ‘defer’ prosecution indefinitely, provided the defendant does not subsequently breach the agreement. Key advantages of a DPA include avoiding a long and expensive trial and minimising the reputational damage caused by a criminal conviction.
Since the introduction of DPAs in 2014, the SFO has entered into 12 agreements[8] and the CPS has entered into one agreement.[9] In Labour’s Plan to Close the Tax Gap,[10] published shortly before the 2024 general election, Labour expressed dissatisfaction with the number of criminal prosecutions and criticised the ‘weakened … deterrent effect’ this has resulted in. One possible avenue they have suggested to address this is to expand the use of DPAs to include individuals (the current scheme being limited to particular offences committed by corporate bodies). One might think that COP9 already serves this purpose but there is a crucial difference: DPAs are public. Should the government go ahead with this planned expansion, it will be interesting to see what impact, if any, this has on HMRC’s willingness to enter into the COP9 process and/or the terms it is willing to agree to under that process.
The end to the non-dom regime
The end to the non-domicile regime, under which certain taxpayers could elect to pay tax on foreign income/gains only when remitted to the UK, is expected to occur with effect from 6 April 2025.[11] Significant sums of foreign income/gains are therefore expected to become taxable for the first time and HMRC will need to consider how to police the new regime effectively. Flexing their muscles in the realms of criminal investigations using their extensive powers may then prove a useful deterrent.
Despite the already broad powers afforded to HMRC, the Labour government has made their dissatisfaction with the current levels of criminal prosecutions in the context of tax non-compliance clear. Should they follow through with the plans set out during their election campaign, it is expected that an extra GBP3 billion will be allocated to HMRC, with the purpose of employing an additional 5,000 employees by 2030 and thereby providing the resources to secure more criminal convictions. With the political push to recover more tax through criminal investigations and/or DPAs, it is more important than ever that clients understand their rights and options during such investigations.
When deciding how to respond to a criminal investigation conducted by HMRC, whether as an individual or company suspected of wrongdoing, or a third party required to disclose information, clients will need legal advice from specialist tax and white-collar crime lawyers.
[1] Taxation, ‘Criminal charges rise 80% in a year’
[2] Above, note 1
[3] HMRC’s criminal investigation policy
[4] Joseph Hage Aaronson, ‘HMRC Makes Changes to COP9’
[5] The previous COP9 guidance
[7] HMRC’s criminal investigation policy
[10] ‘Labour’s Plan to Close the Tax Gap’
[11] Tax Journal, ‘Much ado about non-doms: the new policy paper’
Original article can be found here: Search and seizure (STEP Journal)
This decision is a stark reminder of the public nature of litigation. Before embarking on any litigation, practitioners would be wise to advise their clients on (i) the importance placed on hearings and decisions being public and (ii) the very limited circumstances in which their identity could be protected.
For those considering making an application for anonymity, this decision emphasises the need to accumulate evidence to support an assertion that failure to provide such anonymity would cause harm. That the taxpayer in this case was unable to preserve their anonymity by withdrawing their substantive appeal also flags the importance of considering all the consequences of making an interim application.
Note that the Taxpayer remains anonymous for the time being pending appeal. Either party may later seek to appeal this discrete issue which will continue to remain live, regardless of whether the substantive appeal is later withdrawn or settled.
The decision additionally provides guidance for third parties seeking disclosure of documents, including the test for determining such applications and a reminder of the importance of seeking disclosure from the correct court or tribunal.
In a decision released on 11 January 2024 (the January Decision) the UT allowed an appeal against a case management direction issued by the FTT on 15 September 2021 that ‘preliminary proceedings in this matter shall be heard in private’. The January Decision was temporarily anonymised, pending the expiry of the period for seeking permission to appeal, permission being refused or the taxpayer’s appeal ultimately failing.
On 9 April 2024, the taxpayer made an application to the UT to continue the anonymity proceedings provided for in the January Decision (the Anonymity Application) on the basis that the Taxpayer had decided to withdraw his substantive appeal to the FTT and ‘in those circumstances he ought to be permitted to retain the existing anonymity’. The taxpayer then later withdrew their substantive appeal on 8 October 2024.
Two of the key grounds for the Anonymity Application were:
One of the third parties, Times Newspapers Ltd and News Group Newspapers Ltd (together NGN), also applied for disclosure of a number of documents relating to both the appeal to the UT and the substantive appeal with the FTT.
The Anonymity Application
The UT refused the Anonymity Application. In doing so, it held that it is not the application for privacy which leads to publicity (if a privacy application is refused) but the choice to bring a tax appeal (or any other civil proceedings) [para 26]. The UT ‘firmly reject[ed]’ the taxpayer’s submissions that the very act of making a privacy application (regardless of its merits and without any supporting evidence) (i) generates anonymity for the proceedings in question, (ii) can be carried out with no risk of anonymity being lost, even if refused or overturned on appeal, and (ii) must itself attract permanent anonymity, in circumstances where the substantive appeal is eventually withdrawn [para 34].
A factor which appeared to have played a prominent role in the UT’s decision was the taxpayer’s failure to produce any evidence of potential harm which was said to have justified either the application to the FTT for privacy or the Anonymity Application. The UT further noted that the necessary requirement to justify the Anonymity Application did not disappear simply because the taxpayer had withdrawn their substantive appeal to the FTT.
In reaching its decision, the UT applied the principles for determining anonymity applications set out by Lord Neuberger in JIH v News Group Newspapers Ltd [2011] EWCA Civ 42, stating those principles would be undermined if the Anonymity Application was ‘granted without any consideration of the degree of necessity, the facts and circumstances said to justify anonymity, or the proportionality of the derogation from the principle of open justice’ [para 33].
The UT further confirmed that the guidance on the principle of open justice provided in Farley v Paymaster Ltd (1836) t/a Equiniti [2024] EWHC 3883, in the context of Civil Procedure Rules, equally applies to tribunal proceedings [paras 17–18].
The UT additionally distinguished the exception to open justice established in Scott v Scott [1913] A.C. 417 on the basis that that decision applied specifically to cases where trade secrecy is the subject matter of proceedings. JK v HMRC [2019] UKFTT 411 (TC), A v Burke and Hare [2022] IRLR 139 and Zeromska-Smith v United Lincolnshire Hospitals [2019] EWHC 552 (QB) were also all distinguished as each ‘concerned a situation in which the applicant had a strong, arguable case, supported by evidence, for privacy or anonymity’ [para 29].
Disclosure application
Paragraphs 44 to 50 of the UT’s decision concerned NGN’s disclosure application. In summary:
Original article can be found here: UT considers taxpayer’s application for permanent anonymity and third-party disclosure request (HMRC v The Taxpayer and Others) - Lexis
Helen McGhee TEP, Elizabeth Dean and Megan Durnford consider HMRC’s ever-expanding criminal investigation powers
The number of civil investigations opened by His Majesty’s Revenue and Customs’ (HMRC’s) Offshore Corporate and Wealthy team more than doubled between 2021/2022 and 2022/2023, rising from 284 to 627 respectively.[1]
The number of Crown Prosecution Service decisions to bring criminal charges rose 80 per cent over the same period, going from 46 to 83.[2]
HMRC has extensive powers to support this increasingly aggressive approach taken to noncompliance.
Should His Majesty’s Revenue and Customs (HMRC) decide to start a criminal investigation, the powers already available to its authorised officers are expansive.
Search warrants
It is not just the police who can carry out ‘dawn raids’. HMRC too, with a warrant granted by a magistrates’ court, can enter one’s property unannounced, often early in the morning, to collect evidence to further an investigation into HMRC-related offences. During the search, HMRC can seize any material to which the warrant relates. Although HMRC cannot use certain documents (those protected by legal professional privilege, for example), it can take months for an independent barrister to determine which of the material seized falls within that limited category. It may be possible to challenge the legality of the search warrant itself, and so the retention and/or use of any documents seized by HMRC, or to argue that the seized material falls outside the scope of the warrant.
Orders and notices
Production orders and disclosure orders/notices are useful instruments in HMRC’s toolkit as they grant HMRC the ability, when conducting investigations into particular offences, to compel those subject to the order or notice (often third parties such as banking staff or accountants) to provide specified material and/or information, including by answering questions relevant to the investigation in an interview with HMRC. Compliance with such orders is compulsory and non-compliance is an offence punishable by a fine and/or imprisonment. HMRC must apply for a production order in the Crown Court. Representations can be made at that hearing on behalf of the individual or company to argue that the proposed terms of the order are too broad in scope. Moreover, the individual or company which is required to produce material and/or information in response to the production order or disclosure order/notice is often given only seven days to comply. It may be possible to negotiate with HMRC to extend time for compliance where that task is particularly onerous.
Arrest
HMRC’s powers of arrest may only be used in relation to HMRC-related offences and in circumstances where the authorised officer has reasonable grounds for believing that it is necessary to arrest the person in question. The consequences of doing so can be far-reaching, for example, the US will often reject visa applications from persons who have been arrested. In addition, HMRC can search suspects and premises following an arrest. Voluntarily attending an interview under caution will normally negate the necessity of an arrest. However, obtaining specialist legal advice is critical in deciding whether to attend an interview voluntarily and, if so, whether to answer HMRC’s questions in full, answer ‘no comment’, or provide a written statement prepared in advance.
Recovery of assets
HMRC can recover criminal assets through the Proceeds of Crime Act 2002.
Accessing data
HMRC can apply to the Court to use intrusive surveillance powers in the context of serious crime. This does not mean however, that one’s data is off limits in any other instance. As HMRC’s criminal investigation policy makes clear,[3] ‘HMRC may observe, monitor, record and retain internet data which is available to anyone.’ This is known as ‘open source’ material and includes blogs and social networking sites where no privacy settings have been applied. We are living in an increasingly digital age and as a result, HMRC have access to a plethora of information on any given individual.
A Code of Practice 9 (COP9) is a process whereby a person whom HMRC suspects is guilty of tax fraud is given the opportunity to make a disclosure setting out the background/reasons for any noncompliance and make good any potentially unpaid tax. In exchange, subject to some exceptions, HMRC will formally agree not to open a criminal investigation. This agreement is called the Contractual Disclosure Facility (CDF).
The HMRC COP9 guidance was substantially altered in 2023.[4] One change of particular note was the broadening of the definition of tax fraud. Under the previous COP9 guidance,[5] tax fraud was defined by HMRC as ‘dishonest behaviour that led to or was intended to lead to a loss of tax’. Under the new COP9 guidance,[6] however, this was extended to ‘dishonest behaviour that led to or was intended to lead to a risk of loss of tax’. Taxpayer behaviour may fall within this definition even if the fraud is in respect of tax owed by another, even if the individual does not personally make any gain. HMRC’s definition of ‘tax fraud’ for the purposes of COP9 is slightly different to when it is being prosecuted as a criminal offence. For example, a person will be guilty of fraud by false representation if they dishonestly make a false representation and intends, by making that representation, to make a gain for themselves or another, or to cause loss to another or to expose another to a risk of loss.
It is HMRC’s policy to deal with fraud by use of the cost-effective civil fraud investigation procedures under COP9 ‘wherever appropriate’. HMRC intends to reserve criminal investigations ‘for cases where HMRC needs to send a strong deterrent message or where the conduct involved is such that only a criminal sanction is appropriate.’ When deciding between COP9 or a criminal investigation, HMRC’s criminal investigation policy also confirms one factor will be whether the taxpayer has made a complete and unprompted disclosure of the offences committed.[7] In cases of non-compliance, following a COP9 route will almost always be preferable, particularly given the broad powers available to HMRC in a criminal investigation and the risk of conviction and a potential sentence of imprisonment following a criminal prosecution.
New criminal offence: failure to prevent fraud
The new ‘failure to prevent fraud’ corporate offence is expected to come into force in the first half of 2025. Specifically, the new offence will be committed if one of the relevant body’s associated persons commits a specified type of fraud intending to benefit, directly or indirectly, the relevant body or a person to whom services are provided on its behalf. Although it only applies to large organisations, this new offence has a broader scope than the similar ‘failure to prevent the facilitation of tax evasion’ offence created under the Criminal Finances Act 2017 (the Act). The definition of the relevant body’s associated persons is wider including:
Unlike the mentioned offence under the Act, HMRC will not need to prove that the subsidiary was performing a service on behalf of the relevant body.
Expansion of DPAs
A deferred prosecution agreement (DPA) is an agreement, approved by a court, between either the Crown Prosecution Service (CPS) or the Serious Fraud Office (SFO) and an offending company, as an alternative to prosecution. Under the agreement, the corporate defendant will agree to certain conditions (such as payment of a financial penalty) and the prosecuting agency agrees to ‘defer’ prosecution indefinitely, provided the defendant does not subsequently breach the agreement. Key advantages of a DPA include avoiding a long and expensive trial and minimising the reputational damage caused by a criminal conviction.
Since the introduction of DPAs in 2014, the SFO has entered into 12 agreements[8] and the CPS has entered into one agreement.[9] In Labour’s Plan to Close the Tax Gap,[10] published shortly before the 2024 general election, Labour expressed dissatisfaction with the number of criminal prosecutions and criticised the ‘weakened … deterrent effect’ this has resulted in. One possible avenue they have suggested to address this is to expand the use of DPAs to include individuals (the current scheme being limited to particular offences committed by corporate bodies). One might think that COP9 already serves this purpose but there is a crucial difference: DPAs are public. Should the government go ahead with this planned expansion, it will be interesting to see what impact, if any, this has on HMRC’s willingness to enter into the COP9 process and/or the terms it is willing to agree to under that process.
The end to the non-dom regime
The end to the non-domicile regime, under which certain taxpayers could elect to pay tax on foreign income/gains only when remitted to the UK, is expected to occur with effect from 6 April 2025.[11] Significant sums of foreign income/gains are therefore expected to become taxable for the first time and HMRC will need to consider how to police the new regime effectively. Flexing their muscles in the realms of criminal investigations using their extensive powers may then prove a useful deterrent.
Despite the already broad powers afforded to HMRC, the Labour government has made their dissatisfaction with the current levels of criminal prosecutions in the context of tax non-compliance clear. Should they follow through with the plans set out during their election campaign, it is expected that an extra GBP3 billion will be allocated to HMRC, with the purpose of employing an additional 5,000 employees by 2030 and thereby providing the resources to secure more criminal convictions. With the political push to recover more tax through criminal investigations and/or DPAs, it is more important than ever that clients understand their rights and options during such investigations.
When deciding how to respond to a criminal investigation conducted by HMRC, whether as an individual or company suspected of wrongdoing, or a third party required to disclose information, clients will need legal advice from specialist tax and white-collar crime lawyers.
[1] Taxation, ‘Criminal charges rise 80% in a year’
[2] Above, note 1
[3] HMRC’s criminal investigation policy
[4] Joseph Hage Aaronson, ‘HMRC Makes Changes to COP9’
[5] The previous COP9 guidance
[7] HMRC’s criminal investigation policy
[10] ‘Labour’s Plan to Close the Tax Gap’
[11] Tax Journal, ‘Much ado about non-doms: the new policy paper’
Original article can be found here: Search and seizure (STEP Journal)
We are happy to announce that JHA's Tax Disputes Team has been ranked as Band 1 by Chambers Global today. A special congratulations to our lawyers who also received individual recognition: Graham Aaronson KC (Band 1), Michael Anderson (Band 2) Iain MacWhannell (Band 4) and Paul Farmer (Senior Statespeople).
This is the latest successful ranking, following previous top-tier rankings in Legal 500 United Kingdom 2025, Chambers UK 2025 and Chambers High Net Worth Guide 2024.
