How HMRC decides between civil and criminal action

HMRC’s stated policy is to deal with tax fraud through the civil Code of Practice 9 procedure wherever appropriate, and to reserve criminal investigation for cases where it needs to send a strong deterrent message or where only a criminal sanction is appropriate. The choice is made inside HMRC’s Fraud Investigation Service against the published criminal investigation policy, and it is not fixed: a civil case can be referred back for criminal investigation if the taxpayer lies, rejects the civil offer or leaves frauds out of the disclosure.

What is HMRC’s starting point?

HMRC’s criminal investigation policy says it is HMRC’s policy to deal with fraud by the cost effective civil fraud investigation procedures under Code of Practice 9 (COP9) 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 conduct a criminal investigation in any case.

HMRC’s briefing on its approach to tax fraud explains the same choice in terms of three situations where it uses its criminal capabilities:

1. where a fraud is particularly serious, for example large losses or conduct that merits a strong response;
2. where it wants to send a deterrent message to a sector or group where fraud is prevalent, including professionals who carry out or enable fraud; and
3. where civil powers are not enough to uncover the truth or recover the tax, which can justify covert techniques, searches and arrests.

The same briefing says criminal cases are expensive and time consuming and are used selectively. Most tax fraud work uses civil powers, with penalties of up to 200% of the tax in some cases. This page looks at how that choice is made; for what each route involves, see criminal tax investigations and COP9 fraud investigations.

Which factors push a case towards prosecution?

The policy gives a list of circumstances in which HMRC will generally consider a criminal rather than civil investigation. It says the list is not exhaustive. Grouped by what they tell HMRC about the case, they are:

What HMRC is weighing	Circumstances in the policy
Scale and organisation	Organised criminal gangs attacking the tax system; systematic frauds where losses are a serious threat to the tax base, including conspiracy
Who the person is	Someone holding a position of trust or responsibility; advisers, accountants, solicitors and others acting in a professional capacity who launder money
How the fraud was carried out	Suspected deliberate concealment, deception, conspiracy or corruption; false or forged documents; avoidance schemes relying on false or altered documents or misrepresented facts
Conduct towards HMRC	Materially false statements or documents in a civil investigation; theft, misuse or unlawful destruction of HMRC documents; assault on, threats to or impersonation of HMRC officials
History	Previous offences, a repeated course of unlawful conduct, or previous civil action
Wider context	Importation or exportation breaching prohibitions and restrictions; a link to suspected wider criminality, domestic or international

No single factor decides a case. The policy describes these as circumstances in which HMRC will generally consider the criminal route, not ones that make prosecution automatic, and it does not define terms such as “position of trust or responsibility”.

What counts in the taxpayer’s favour?

The policy names one factor expressly: whether the taxpayer has made a complete and unprompted disclosure of the offences committed. An unprompted disclosure is, by definition, one made before HMRC has given you reason to think it is about to find out.

The formal way to do that is to ask for the Contractual Disclosure Facility using form CDF1. HMRC’s guidance says you do not need to wait to be contacted, but that HMRC does not have to offer a contract and cannot do so if you are already involved in a criminal investigation by HMRC or another law enforcement agency. The same guidance says accepting the facility and making a full disclosure is the only way to guarantee that HMRC will not criminally investigate with a view to prosecution. The guarantee is limited: COP9 says the undertaking covers only the person making the disclosure, does not bind other agencies such as the police or regulatory bodies, and does not extend to offences not committed against HMRC. See does COP9 protect you from prosecution.

Are some frauds never dealt with civilly?

The policy names offences where HMRC will not usually adopt COP9 at all. Its examples are VAT “bogus” registration repayment fraud and organised tax credit fraud. In those cases the civil route is not the default, whatever the disclosure.

Who makes the decision, and when?

Inside HMRC, the Fraud Civil Investigation Manual (FCIM201050) says tax fraud cases adopted for investigation are worked in one of two ways: with a view to criminal prosecution, or under COP9. Officers must review all facts and evidence bearing on that choice with an open mind and keep a clear audit trail leading to the decision. When considering whether a case suits COP9, they must check at the outset whether any issue falls within the criminal investigation policy and refer it for criminal investigation where appropriate. Only if the case falls outside the policy, or has been submitted but not adopted for criminal investigation, is it considered against the COP9 criteria. Criminal work is carried out by FIS (Crime), not under the COP9 procedure (FCIM201030). For the part of HMRC involved, see HMRC’s Fraud Investigation Service.

HMRC does not decide whether to prosecute. Its guidance on criminal powers says that decision is made by an independent prosecuting authority after HMRC’s investigation: the Crown Prosecution Service in England and Wales, the Crown Office and Procurator Fiscal Service in Scotland, and the Public Prosecution Service for Northern Ireland. HMRC investigators and lawyers consult the prosecuting authorities at an early stage on major prosecutions.

Can a civil case turn criminal later?

Yes. COP9 says that if HMRC begins a civil investigation, it can escalate into a criminal one at any point. The trigger points in HMRC’s own guidance are:

• Rejecting the CDF offer or not replying within 60 days. FCIM201030 says HMRC then has the option of referring the case back to FIS (Crime), although in most cases it will pursue a civil investigation. HMRC’s CDF guidance warns that the signed rejection letter can be used in court as evidence of an intention to mislead. See rejecting a COP9 offer.
• An incomplete Outline Disclosure. If it does not include the frauds HMRC suspects, FCIM204050 tells the officer to refer the case back to FIS (Crime), which either adopts it for criminal investigation or returns it for COP9.
• Lying during the investigation. If the officer obtains evidence of a materially false statement or document made with intent to deceive, civil action must be suspended and the case referred back to FIS (Crime) (FCIM204050). COP9 adds that a false Certificate of Full Disclosure may lead to a criminal investigation for submitting a false document.

Can civil and criminal action run together?

They can. HMRC’s guidance on its criminal powers says a person can be under criminal investigation and subject to civil processes to assess and collect tax at the same time, and that internal procedures stop civil powers being misused to gather evidence for a criminal charge. The tax is still collected either way. What changes is the penalty position: under paragraph 21 of Schedule 24 to the Finance Act 2007, a person is not liable to an inaccuracy penalty for an inaccuracy for which they have been convicted of an offence.

How might the choice play out?

Illustration only. Two traders have each suppressed takings over several years.

• Trader A receives a COP9 letter, takes specialist advice, accepts the CDF within 60 days and makes an Outline Disclosure that covers all the suppression. HMRC’s undertaking applies, the case stays civil, and the outcome is tax, interest and a penalty reduced for cooperation.
• Trader B accepts the CDF but discloses only one year and later supplies altered till records. The incomplete disclosure and the false documents are both points at which the officer must refer the case back to FIS (Crime), and the false documents fall squarely within the policy list.

What mistakes make prosecution more likely?

• Letting the 60 day COP9 deadline pass; HMRC treats silence as a decision not to cooperate.
• Making a partial Outline Disclosure in the hope that HMRC knows about only some of the fraud.
• Producing reconstructed or altered records to support figures already given.
• Assuming the CDF protects business partners, a company’s other officers or anyone else named in the disclosure.
• Treating dishonesty as careless error; see what counts as a deliberate inaccuracy.

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Related Accountapedia entries

• Criminal tax investigations
• Transfers between spouses and civil partners
• Who decides directors’ pay
• The spouse and civil partner exemption for IHT
• What is HMRC’s Fraud Investigation Service

Sources

• GOV.UK: Hmrc criminal investigation policy
• GOV.UK: Hmrcs approach to tax fraud
• GOV.UK: Admitting tax fraud the contractual disclosure facility cdf
• GOV.UK: Code of practice 9
• GOV.UK: Manual page FCIM201050
• GOV.UK: Manual page FCIM201030
• GOV.UK: Manual page FCIM204050
• GOV.UK: Criminal investigation
• legislation.gov.uk: Act 2007 c. 11, schedule 24

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.