Introduction
HMRC’s latest Fraud Investigation Service Technical Note shows a clear increase in civil and criminal enforcement activity, a sharper focus on deliberate behaviour, and a continued commitment to pursuing complex fraud across VAT, PAYE and the hidden economy. For businesses and directors, the data confirms that HMRC is using a wider set of powers and a more targeted approach to risk identification than in previous years.
This article explains what the findings mean in practice and how organisations should respond.
At a glance
HMRC’s 2023 to 2024 Fraud Investigation Service figures highlight:
- Increased use of civil and criminal powers, including more fraud prosecutions.
- A continued focus on VAT, PAYE, payroll fraud and the hidden economy.
- Rising use of data analytics to identify risk, including corporate structures and supply chains.
- A strategic shift from volume to complexity, with resources concentrated on higher harm cases.
- Clear warnings for directors of companies with tax arrears who may face enforcement, including winding up applications.
Why is HMRC placing more emphasis on complex and high harm tax fraud?
HMRC confirms that its investigation strategy now prioritises complex, organised and higher value fraud over lower harm cases.
- This shift is driven by both policy and practical considerations.
- HMRC has invested heavily in analytics tools to identify networks of linked companies, supply chain irregularities, and unusual patterns of declarations, meaning investigators can now target fraud that is difficult to detect without technical support.
The Fraud Investigation Service continues to focus on
- VAT repayment fraud,
- payroll fraud,
- Missing Trader Intra Community (MTIC) fraud,
- excise duty evasion and
- undeclared trading.
These areas produce some of the largest revenue losses for the Exchequer and typically involve multiple corporate entities, directors and advisers. The more sophisticated the fraud, the more likely it is to attract FIS attention.
For directors and business owners, the message is that HMRC is prepared to pursue cases involving complicated company structures and cross border transactions, even where the fraud is not initially obvious from company accounts.
FWJ Takeaway: HMRC is moving further towards high value, complex fraud cases, supported by extensive data analysis and cross departmental intelligence sharing. Our team is led by Andy Lynch who worked in the HMRC Investigations team for 18 years and who has 30 years experience in these claims.
How is HMRC using data to identify and pursue suspected fraud?
The Technical Note confirms that sophisticated data analytics now underpin most FIS casework. HMRC states that search and risk systems draw information from tax returns, company records, employment data, payment information, third party datasets and international information exchanges. This allows investigators to establish patterns that might indicate fraud, such as:
- repeat VAT repayment claims across linked entities
- supply chain irregularities associated with MTIC fraud
- undeclared income indicative of hidden economy activity
- payroll discrepancies that may suggest PAYE or labour fraud
- trading models that do not align with declared turnover
Data analysis also informs HMRC’s decision on whether to open a civil enquiry, move to a criminal investigation, or issue penalties under the Finance Act. The report highlights an increased ability to link behavioural risk factors to specific taxpayers, meaning directors and companies with previous compliance issues may face a higher likelihood of scrutiny.
For taxpayers under enquiry, this means that HMRC’s internal data is likely to be detailed and well structured. Responses need to be precise, supported by evidence, and consistent with contemporaneous records.
FWJ Takeaway: HMRC is using advanced data systems to detect anomalies, assess risk and escalate cases more quickly. Taxpayers should assume HMRC holds detailed information before an enquiry begins.
What types of fraud are HMRC prioritising based on the latest figures?
The FIS statistics show that HMRC continues to target a core group of fraud types. These include
- VAT repayment fraud,
- payroll fraud,
- labour supply chain abuse,
- hidden economy cases and
- excise duty evasion.
These areas account for a significant proportion of lost revenue and often involve organised structures.
The Technical Note highlights that HMRC is also working closely with other domestic agencies and international counterparts. This includes sharing intelligence with the National Crime Agency, Border Force, and foreign tax authorities. For businesses operating in sectors such as logistics, wholesale, construction, hospitality or import and export, the likelihood of sector based scrutiny remains high.
The data further shows that HMRC is still conducting criminal prosecutions where civil action is insufficient. While the number of criminal cases is lower than before the pandemic, HMRC is focusing on cases that send a deterrent message to particular industries or behaviours. Cases involving professional enablers, including accountants, company formation agents and payroll operators, have received increased attention.
FWJ Takeaway: The priority areas remain VAT, PAYE, hidden economy activity and excise duty. HMRC is also focusing more on professional enablers and cross border structures.
How does HMRC decide whether to take civil or criminal action?
The HMRC Fraud Investigation Service operates two main pathways: civil action or criminal investigation. The Technical Note indicates that the choice depends on the seriousness of the behaviour, the value of the suspected fraud and the impact on the tax system.
- Civil powers are often used for deliberate inaccuracies, carelessness, or failures to notify.
- These may be dealt with through penalties, recovery of tax, or Code of Practice 9 / COP9 settlements.
- Criminal action is reserved for cases involving dishonesty, concealment, false documentation, organised fraud or repeated non compliance.
HMRC continues to rely on Code of Practice 9 for cases where fraud is suspected but where a civil resolution is appropriate. Where a company or director refuses to cooperate, or where the evidence shows serious dishonesty, HMRC may instead proceed with a criminal investigation.
If tax remains unpaid, HMRC may use enforcement measures including taking control of goods, instructing enforcement agents, applying for an HMRC winding up petition or statutory demand, or issuing security notices for PAYE or VAT.
FWJ Takeaway: HMRC’s response depends on the level of wrongdoing. Civil penalties apply to inaccuracies or non compliance, while deliberate dishonesty may result in criminal investigation or prosecution.
What should businesses and directors do if they fall within HMRC’s enforcement priorities?
Any business or director who receives an investigation letter, information request or notice of assessment should respond quickly and accurately. The Technical Note makes clear that HMRC is using a risk based approach, meaning delays or incomplete information may be interpreted as higher risk behaviour.
Practical steps include
- reviewing records,
- checking filings for consistency, and
- seeking specialist advice at an early stage – our team is here to help you.
- If the matter involves suspected fraud, the appropriate approach may include a managed disclosure, a Code of Practice 9 response, or structured correspondence that addresses HMRC’s evidence.
Where cash flow issues have contributed to non payment, a time to pay arrangement may be considered if supported by realistic financial information.
If HMRC takes enforcement action for unpaid liabilities, directors should be aware of the risk of compulsory liquidation and the potential for personal implications. In more serious cases, HMRC may refer the matter for criminal consideration or seek asset freezing measures.
FWJ’s experience with tax disputes, VAT investigations, director claims and insolvency proceedings places our team in a strong position to assist companies facing parallel civil and financial pressures.
Summary
Act early, provide accurate information and seek specialist support from our expert defence team. HMRC’s data driven approach means unexplained delays or gaps in evidence may increase enforcement risk.
Conclusion
HMRC’s Fraud Investigation Service Technical Note for 2023 to 2024 reinforces the department’s dedication to tackling complex and deliberate fraud. The use of advanced analytics, combined with closer cooperation across agencies, is shaping a more assertive enforcement landscape. For businesses and directors operating in sectors under scrutiny or with past compliance issues, this means a greater likelihood of targeted enquiries and, in serious cases, criminal investigation.
Timely and well informed responses remain essential. Clear records, early engagement and specialist advice are key to navigating an increasingly sophisticated HMRC approach.
