By Evan Wright, Fraud and Business Crime Partner at JMW Solicitors
New legislation and greater levels of cooperation between government and law enforcement agencies have meant that HMRC dawn raids have become increasingly cost-effective in terms of recovering revenue. Between 2012 and 2017, the number of raids carried out has increased by a third, and this rate looks set to continue.
If HMRC suspects someone is committing tax offences and particular statutory criteria are met, they are able to raid the home and/or business of the individual in order to gather evidence to support their investigation. Raids are usually early in the morning and can target multiple branch offices at the same time to avoid any ‘tip-offs’ between locations.
A dawn raid can be extremely disruptive to a business, with HMRC officers authorised to remove computers, phones and documents, etc. from the commercial property or residence. This activity can prevent employees from carrying out their work and the business from operating as usual.
A raid does not necessarily mean that persons at the premises will become suspects in the wider investigation. A warrant is a method by which material is gathered so as to preserve its evidential integrity, and this can involve innocent parties. However, the majority of warrants are executed because of persons associated in some way with the address are suspected as having committed particular criminal offences. Arrests are often made and it is important to obtain early expert advice if legal rights are to be properly protected.
To help reduce the disruption of a dawn raid, every company should have a strategy in place to deal effectively with HMRC intervention, regardless of whether or not they have reason to be concerned about their own commercial activity.
Assign someone to take the lead
The first element of your strategy should be to have a nominated member of staff who can take the lead should a dawn raid occur. This employee should be fully briefed on the protocol to follow so they can take charge on the day. Their duties can include:
- Note the time the officers arrive at the premises
- Check the ID of all the officers in attendance
- Ask that the officers remain in the reception area until legal representation arrives
- Check the search warrant they present and take a copy
- Take the officers’ contact details so that they can be contacted later regarding the investigation and the seized goods
Management should also ensure that all electronic data is backed up on a regular basis in order to minimise any difficulties following a raid.
Alert your solicitor
In the event of a raid, your initial step should be to obtain legal advice from a solicitor experienced in matters of this type. Throughout proceedings, it is important to remain calm and unobstructive. Officers are unlikely to object when properly challenged by a business trying to protect its legal rights and legitimate commercial interests.
Although officers do not have to wait until your solicitor arrives before commencing the search, most will usually agree to speak with them by telephone. Should officers begin their search before your solicitor arrives or speaks with them by telephone, it is recommended that a member of staff shadow each officer and make records of all documents examined, copied or removed. Employees should also request to make copies of any documents that are to be taken. While it may be possible to make a digital copy of data removed during the raid – if, for instance, a hard drive or laptop is taken – employees should take photos of the serial numbers on all hardware removed from the premises.
Officers will often attend the premises in company with a computer expert so that, where possible, servers and PCs can be copied on site without being removed. If the officers insist upon removing a particular server or PC, you should ask why it cannot be copied on site and you should write down their answer. It can take a long time to secure the return of devices removed from the premises.
Your employees’ rights
HMRC officers cannot interview or interrogate employees during a raid. They are able to ask practical questions (for example, the whereabouts of documents, hardware or passwords for computers). Such information should be provided wherever possible, as obstructing an officer in the course of executing a warrant can be a criminal offence.
If a key or other requested assistance is not provided for entry to locked rooms and safes, officers are permitted to use reasonable force. Personal searches of employees can be permitted, but must be completed by an officer of the same gender and searches must be in pursuance of the terms of the warrant of the Police and Criminal Evidence Act codes of practice.
Collect receipts of all removed goods
Finally, officers will ask someone present at the premises to sign receipts for the removal of goods and documents. They are usually referred to as ‘Property Registers’. It is important to check the contents and description carefully to ensure it is clear and accurate. Important items are sometimes described very generally and it can be difficult to identify the item from the register after the event. The officers will supply a carbon copy of the receipts before they leave. They must be retained because they will be the only immediate link to the seized items and if some items are business critical, your solicitor will need to accurately identify them in the course of securing their return.
Once the raid has finished, the nominated staff member should compile all receipts, copies and other data collected by the shadowing employees, and make this available to the senior management team and/or the solicitor when they arrive.
Goods and documents that cannot be seized
Documents protected by Legal Professional Privilege (LPP) are not within the scope of the warrant. LPP entitles a client to refuse to disclose confidential communications to another party (for example, HMRC or the court). It exists to allow clients to understand that what they tell their solicitor will be kept in confidence and not revealed without their consent or by order of the court.
Typically, LPP exists in two situations:
- Legal advice privilege – communications between lawyer and client
- Litigation privilege – communications between lawyer and client created for the dominant purpose of obtaining legal advice or preparing for imminent legal proceedings
Not all communications with a lawyer are protected by LPP, but a diligent HMRC officer will recognise when a document is likely to be protected; however, if an agreement cannot be reached, these documents should be placed in a sealed envelope until the issue is resolved. In some instances, LPP documents do not come to light until officers consider the evidence in more detail after it has been removed from the premises. In this event, they are obliged to follow a particular protocol and specific legal advice is recommended so that rights can be protected.
By following these steps, and remaining calm, your business and employees will be able to undergo a dawn raid with minimal stress and agitation, and so get back to work as quickly as possible.
Not all criminal defence or regulatory lawyers will have expertise in challenging the legality of search warrants or initiating legal proceedings in dealing with the consequences of an HMRC raid. You should research and identify the expertise in advance. The costs of legal advice can be substantial, but might be covered by an existing company insurance policy. If you are unsure, your broker or lawyer should be able to clarify. Quite a few clients who instruct us after the event subsequently discover that their insurance policy does not obtain the necessary cover. It is not expensive and should be explored as part of the company’s efforts in protecting its own business and reputation.
