HMRC’s Approach to Obtaining Communications Data in Criminal Investigations

Syedur Rahman of Rahman Ravelli details the powers that HM Revenue and Customs has for seeking communications data while investigating tax fraud.

HM Revenue and Customs (HMRC) is able to compel taxpayers to provide documentation and information as part of a civil tax enquiry that it is conducting. It is also able to exercise such powers over relevant third parties, such as the taxpayer’s accountant, financial advisor or bank.

But when it is investigating possible criminal activity, it also has the power to obtain communications data.

Communications Data Requests

Part 3 of the Investigatory Powers Act 2016 (IPA) gives HMRC the power to request communications data that is held by telecommunications operators. HMRC is able to seek information regarding the time of a call, its duration, where it was made and the number that was called. If it wants to find out what is being discussed in the call, HMRC has to seek the authority of the Secretary of State.

HMRC makes thousands of requests each year to gain access to communications data. While figures have not yet been made available for 2020 and 2021, it would be surprising if there has not been an increase in such requests. The rise in working from home as a result of the COVID-19 pandemic has put a heightened emphasis on telecommunications. This is likely to be reflected in HMRC’s increased use of communications data requests as it investigates (among other things) possible furlough fraud.

Emails and Texts

Under the IPA, the definition of communications data includes both emails and text messages. Such communications are arguably more advantageous to HMRC than information about phone calls that does not include the content of the call. Both texts and emails contain detailed information that can be more informative than a record of telephone calls, hence HMRC’s enthusiasm for gaining access to such stored data.

In a criminal investigation, HMRC has a range of ways of accessing emails or messages stored on electronic devices.

The most commonly used ones are:

• The special procedure material provisions contained in Schedule 1 and section 14 of the Police and Criminal Evidence Act 1984 (PACE). These provisions can be used to compel the disclosure of material that is in the possession of a person or organisation, created or acquired in the course of business, held subject to an obligation of confidence or secrecy and likely to be of substantial value to the investigation of the commission of an indictable offence.
• Search warrants issued pursuant to section 8 of PACE. These enable investigators to search and seize material (such as computers, electronic devices and mobile phones) located at a specified business or residential address.

Encryption and Passwords

The HMRC can face difficulties if a seized computer, phone or other electronic device is encrypted or protected by a password. If the owner of the equipment in question refuses to give HMRC the password or encryption key, a notice can be issued against them under section 49 of the Regulation of Investigatory Powers Act 2000 (RIPA). 

This gives HMRC the power to serve notice on a person who is believed to have the password or encryption key, ordering them to provide it within a set period of time. Not complying with a section 49 notice is a criminal offence, with the maximum punishment being an unlimited fine and/or up to two years in prison.

COP 9 - the alternative to criminal prosecution

HMRC can use the aforementioned powers to obtain evidence that will assist a criminal investigation. 

But as its main role is to collect tax revenue, it is not obliged to pursue a prosecution. The evidence it obtains during an investigation does not, therefore, have to be used to bring criminal charges. HMRC can instead use the Code of Practice 9 (COP 9) procedure. This is a civil procedure that HMRC employs when it believes there may have been tax fraud but sees no public interest in bringing a prosecution. Under the COP9 procedure, the taxpayer under investigation is offered the chance to make a full disclosure of their tax affairs under an arrangement known as a Contractual Disclosure Facility.

Information that the HMRC has gained from communications data may influence its decision on whether to prosecute or use the COP9 civil route. Yet if HMRC has decided it needs to use some or all of the practices mentioned above to obtain communications data, this would tend to indicate it does not believe such material will be volunteered, which may mean the decision to investigate with the aim of bringing a prosecution has already been made.

Conclusion

While not determined to bring a criminal prosecution in each and every investigation it conducts, HMRC’s powers give it the ability to obtain the relevant communications data before making the decision whether to bring charges or take the civil route. Any company or business facing such a situation needs to take appropriate legal advice at all stages of an investigation.