HMRC Parallel Investigations – Country Comparative Guides

In this article we explore the concept of parallel (criminal and civil at the same time) tax investigations undertaken by HMRC. We consider what these are, how they develop and offer practical tips for dealing with them. However, in order to fully understand what parallel investigations are we initially set the scene by exploring the evolution of tax evasion, what the tax gap is and why HMRC investigates.

The Evolution of Tax Evasion

The earliest records of taxes go back to Ancient Egypt around 3000 BC. Tax evasion has existed for as long as taxes themselves. Wherever governments have sought to raise revenue, some individuals and businesses have sought ways to either evade or avoid paying it. The Romans kept detailed tax records and history shows that tax evasion was widespread amongst both the rich and the poor. Archaeologists have translated Greek and Roman papyri detailing court trials for elaborate tax frauds, such as forging slave sale documents to evade provincial sales taxes. However, what began as relatively simple efforts to conceal income or disguise transactions has evolved into increasingly sophisticated schemes involving offshore structures, international financial centres and, more recently, digital assets. To keep pace, HMRC has had to become more technologically advanced in gathering intelligence, sophisticated in their approach and be armed with more stringent powers creating a continual “cat and mouse” game between the evaders and the enforcers.

Historically, tax evasion was often remarkably straightforward. Cash-based businesses could underreport takings, taxpayers could omit sources of income from tax returns, and invoices could be manually altered. In the days when cash was king and records were in paper format the ability to hide income and/or inflate expenses was much easier than in today’s digital and connected economy. There was little need for sophisticated structures. Through investigations HMRC have been able to understand the techniques used to evade tax and, through gathering such intelligence, adapt their approach and respond. However, techniques for evading tax have had to evolve trying to stay ahead of the enforcers. But with new powers and knowledge in the hands of HMRC anyone wishing to evade tax has had to look at different ways of concealing their activity from offshore bank accounts, to elaborate structures and more recently the world of digital assets. As financial markets became more sophisticated, tax evasion evolved beyond simple non-disclosure.

Tax evasion has always relied on the same principles – secrecy, obfuscation, deceit, and making simple transactions ever more complex. Rather than simply hiding cash we moved into a world of offshore companies and bank accounts, trusts and foundations, nominee shareholders and complex structures. The goal moved from omitting income from tax returns to creating distance between a taxpayer and income generating assets with the aim of disguising true beneficial ownership. Increasingly such arrangements have blurred the distinction between aggressive tax planning, avoidance and evasion.

Over the last century increasing globalisation has transformed the nature of tax evasion. As banking systems have become more inter-linked, taxpayers have been able to move funds across borders with increasing ease. Over the past fifty years or so, offshore jurisdictions have featured in many tax fraud cases. Banking secrecy laws, limited information exchange and weak beneficial ownership requirements made it difficult for HMRC to identify the true owners of offshore accounts and entities. The scale of such arrangements far exceeded traditional cash-based evasion. It became all too easy for wealth to be concealed beyond the reach of HMRC.

Faced with losses to the Exchequer it became clear that tax leakage needed to be stemmed. HMRC introduced a number of time-limited disclosure facilities between 2007 and 2016 with the incentive of reduced penalties in return for full disclosure. This was followed with a much more punitive system with enhanced penalties for offshore evasion. Added to this the last two decades have seen a dramatic increase in international cooperation with the most significant changes being the introduction of automatic exchange of information between tax authorities, such as the Common Reporting Standard (the “CRS”). In addition to this we have also witnessed other developments such as enhanced anti-money laundering regulations, the introduction of beneficial ownership registers and greater cooperation between tax administrations. Such changes have made sure that offshore accounts and entities are much more visible to HMRC.

Added to this over the past few years there have been data leaks such as the Panama Papers (2016), Paradise Papers (2017), and most latterly the Pandora Papers (2021), demonstrating that confidentiality can be breached and information that was once felt inaccessible become visible.

However, just when HMRC seen to have stemmed the risk of tax evasion from offshore a new threat has emerged – Cryptocurrency. The hallmarks that are attractive to those seeking to evade tax are all there – transactions occur outside the banking system, assets can be transferred globally within minutes, and a belief that there is anonymity. In reality, however, most major cryptocurrencies operate on public ledgers. Every transaction is permanently recorded and can often be analysed using specialised software. Nevertheless, tracing ownership can remain challenging where identities are obscured behind digital wallet addresses. HMRC’s major concerns include failure to declare disposals, undeclared staking rewards, use of privacy focused cryptocurrencies and decentralised finance (DeFi) arrangements operating outside traditional financial systems.

As the digital asset ecosystem expands, HMRC and other worldwide tax authorities continue to invest heavily in blockchain analysis capabilities and specialist investigative teams. In January 2026, the UK introduced the OECD’s Crypto-Asset Reporting Framework (“CARF”) under which crypto-asset service providers became subject to reporting obligations and HMRC began the process of collecting taxpayer identification date.

Looking even further ahead, HMRC could face even further challenges as technology develops. Artificial intelligence, decentralised financial systems and increasingly sophisticated digital marketplaces may create new opportunities for concealment. The rise of tokenised assets, digital payment platforms and global online commerce increases the complexity of monitoring taxable activity.

In order to cope with new and emerging risks HMRC’s response needs to be equally sophisticated in terms of the technology used, powers adopted and the law that underpins those powers. Data analytics are critical to deal with threats and HMRC’s “Connect” system is amongst the best in the world with capabilities including the ability to identify discrepancies across multiple data sources, detect unusual transaction patterns, flag high-risk taxpayers for investigation, analyse cross-border financial flows and use network analysis to identify connected parties and structures.

Never before has HMRC had access to so much information and are gaining even more sophisticated ways of analysing it. Technology plays an increasingly important part in redressing the balance between the evaders and the enforcers.

‘The Tax Gap’ – What it is, why it matters and why HMRC investigates

The tax gap is often referred to but it is also a misunderstood term. It is seen as an important measure in tax administration terms, effectively the benchmark of how well HMRC are performing in its compliance activity. In simple terms it is an estimate of the difference between the amount of tax that should be paid under the law and the amount that is actually collected. According to HMRC’s latest estimates, the UK tax gap for 2024/25 was £59.2 billion, representing 6.4% of total theoretical tax liabilities.

However, the tax gap is a much wider concept than a simple measure of ‘non-compliance’. There are many reasons cited for it and these include errors in tax returns, differences in interpretation of complex legislation, tax evasion, hidden economic activity, criminal attacks on the tax system and non-payment due to insolvency or financial distress.

Therefore, to close this gap, HMRC must adopt differing strategies. Tax evasion is estimated to account for 12% of the overall tax gap (so, approximately £7.1 billion) but not it all, and therefore greater enforcement is not the only answer. Given that a significant proportion of the gap results from mistakes, complexity and misunderstanding of the rules this calls for further simplification and better guidance.

At a time when tax increases are sensitive and there is a large government deficit to fund, measuring, understanding and reducing the tax gap are all equally important. There is also a fairness and trust point. Confidence in the tax system depends on compliance and if it is perceived that some are not paying their fair share of tax and HMRC are not making the required efforts to close the gap then trust is eroded. Closing the tax gap is fundamentally important both from a tax collection and fairness point of view.

While £59.2 billion is an alarming figure, a tax gap of 6.4% means that HMRC are successful in collecting over 93% of tax that is due. By comparative international standards, this means that the UK tax system remains highly effective. What exacerbates the problem for HMRC and ultimately the government is that even a relatively small tax gap (in percentage terms) translates into a very large cash figure when applied to overall tax receipts exceeding £900 billion.

The estimated tax gap for 2023/24 was £46.8 billion, or, 5.3% of total theoretical tax liabilities. This was a record high (at the time) in cash terms, up from an estimated £46.4 billion in the previous year (2022/23). However, subsequent revisions increased the total tax gap for 2023/24 to £52.8 billion and for 2022/23 to £55.3 billion. In other words, the tax gap for 2023-24 was £6 billion bigger than initially thought, and the tax gap for 2022/23 was almost £9 billion bigger than previously thought.

Small businesses comprise by far the largest component of the tax gap by customer group at an estimated 62% share in 2024/25 (£36.7 billion). While large businesses and wealthy individuals are often accused of not paying enough tax these figures suggest that their total share of the tax gap is less than a third of that of small businesses. The challenge for HMRC is that there are many small businesses and even small amounts of non-compliance can distort the figures. Rather than evasion and associated behaviour it is estimated that over 50% of the gap is down to taxpayer mistakes meaning that guidance and education is as important as compliance activity.

The real value in measuring the tax gap is that it is able to provide HMRC with a broad measure of tax compliance. By expressing the shortfall as a percentage of total tax liabilities, it allows comparisons over time and adjusts for economic growth, inflation and changing tax rates.

However, measuring the gap is far from as exact science, it relies on assumptions and trends, and is an estimate rather than a precise calculation. The numbers are subject to revision (an indicator of uncertainty) and it is unable to capture all aspects of taxpayer behaviour.

For these reasons, the tax gap can only ever be a guide rather than something set in stone.

In July 2025 HMRC published its Transformation Roadmap, which outlined its plans to modernize and reform tax and customs administration. Perhaps not unsurprisingly one of the five strategic objectives detailed is to ‘close the tax gap’. HMRC’s stated aim is that by 2030 it will make compliance easy for those who are trying to get their tax right (and so by lessening mistakes) and at the same time making it as difficult as possible for those who seek to deliberately pay less tax than they should or cause harm to the tax and customs system.

HMRC’s compliance strategy is built around:

preventing non-compliance – developing policies, processes and digital services that prevent opportunities for error, avoidance, and evasion. This includes preventing harmful intermediaries from entering the system.
promoting compliance – high-quality, targeted guidance and nudging customers to make correct tax returns and customs declarations when they use HMRC’s digital services or their own tax software.
responding where compliance risks remain – prompting the customer to correct their tax and customs declarations themselves or deploying a compliance officer to investigate and take action to ensure money owed is paid.

As already identified, the future of tax compliance is more and more likely to be data driven. HMRC now have access to unprecedented levels of information from digital reporting systems, international information exchanges, financial institutions and online platforms. Artificial intelligence, data analytics and real-time reporting will undoubtedly change the nature of compliance work. This leads to HMRC taking a more proactive approach by increasingly trying to identify tax risks before tax returns are submitted and intervening earlier when they suspect there could be non-compliance. A good example of this are so-called “nudge” letters. These are a cost-effective way of responding to information held without immediately opening a compliance check relying on behavioural science instead. However, such approach only goes so far.

There remains plenty of occasions when behaviour warrants that HMRC have no option but to open an investigation.

Civil v Criminal Investigations

HMRC investigations broadly fall into two categories: civil investigations and criminal investigations. Whilst both types of investigation consider similar, conduct, the consequences are fundamentally different.

Differing objectives

A civil investigation is primarily concerned with establishing the correct tax liability and recovering (usually through a settlement) any unpaid tax, together with interest, penalties (up to 200% of the tax due in some cases), and possibly other civil sanctions. A criminal investigation, by contrast, is focused on proving criminal offences and, where appropriate, securing a prosecution and conviction as a means of ‘punishing’ tax fraud. Criminal investigations are, understandably, reserved for the most serious cases, and HMRC’s published policy states that it retains discretion to pursue criminal investigations where it considers this necessary and appropriate.

There are many considerations that go into how a case is selected for either civil or criminal investigation. The process is multi-faceted and there is no “one size fits all” approach.

The resultant decision (by HMRC in advancing either a civil or criminal investigation) in turn dictates what powers HMRC will deploy. Civil powers typically include information and document gathering powers, assessing powers, inspection powers, asset recovery and debt collection powers, amongst others. Criminal powers tend to include (but are not limited to) search warrants, arrest and interview powers, production orders, surveillance powers, and asset restraint and confiscation powers.

Differing standards

One of the most significant differences between HMRC’s civil and criminal investigation procedures is the evidential threshold that must be satisfied and is usually a factor that plays a role in determining how HMRC progress an investigation.

Understandably, civil investigations have a lower evidential threshold with HMRC generally needing to establish its case on the balance of probabilities meaning that HMRC must show that it is more likely than not that a tax loss has arisen. Criminal investigations have a higher evidential threshold in that the alleged offence must be proved beyond reasonable doubt. A substantially higher standard, which is reflective of the serious implications and consequences that comes with and from a criminal investigation.

With HMRC’s criminal investigation powers comes significant oversight and legal safeguard. Criminal investigations are rightly subject to rigorous oversight and safeguards much like other law enforcement agencies, so for example HMRC’s criminal investigations must comply with statutory safeguards including the Police and Criminal Evidence Act 1984 (PACE) which regulates matters such as interviews under caution, search warrants, disclosure obligations and the treatment of suspects.

It is only right that individuals facing criminal investigation benefit from higher evidential thresholds, greater protections, and greater oversight than in civil investigations. The stakes are higher.

The role and evolution of Code of Practice 9

As HMRC publicly state, most of its work in tackling tax fraud makes use of its cost-effective civil investigation powers.

HMRC’s ‘Code of Practice 9’ (COP9) plays an important part of that civil investigation process. The background, history and evolution of COP9 is a long and complex one, one that is typically widely debated and challenged. Over time, COP9 has evolved into HMRC’s primary civil fraud intervention tool.

The policy rationale behind COP9 reflects HMRC’s long standing view that, whilst criminal investigations are necessary in some cases, they are resource-intensive, costly, arguably uncertain, and should be reserved for the most serious and egregious of cases.

In summary, HMRC can use the approach set out in its Code of Practice 9; essentially, in exchange for individuals admitting their deliberate dishonesty, paying all their tax and incurring significant financial penalties, importantly they are protected from a criminal investigation, which could, or would, otherwise be the case. An important quid pro quo.

The ‘modern’ COP9 regime (previously known as the Hansard process) was introduced in 2012 where it formalised the relationship between HMRC and the taxpayers by creating a contractual framework, knows as the ‘Contractual Disclosure Facility’ (CDF).

One of HMRC’s emerging concerns with the CDF, however (amongst others), was that some recipients of the CDF did not fully appreciate the significance of accepting a CDF offer, or that civil treatment is not guaranteed (without condition). It has also been the case (at least optically) that civil investigations have not ben taken seriously enough by taxpayers; whether that is because individuals do not fully comply with the COP9 requirements, whether an individual fails to make a full and complete disclosure, and many other reasons.

COP9 was therefore refreshed in June 2023 seeking to clarify obligations imposed on taxpayers under civil investigation, and also strengthen, clarify and re-emphasise COP9’s role as a means to investigate suspected tax fraud. One of the new sections (inter alia) added to the code of practice in June 2023 was to emphasise the different circumstances when a civil/COP9 case can escalate to a criminal investigation and ultimately to prosecution. Helpfully for HMRC, that coincided with a period in which successful criminal proceedings were brought against high profile individuals (who had previously been subject to civil investigation).

Essentially the overriding objective of the June 2023 re-write to COP9 was to “put the teeth back into” HMRC’s key civil investigation mechanism for tackling tax fraud.

What are ‘parallel investigations?

As above, the common expectation is that HMRC will usually conduct either a civil or a criminal investigation. However, that is not always the case and ‘parallel investigations’ are something that are becoming more commonplace (though unfortunately no publicly available statistics are available showing how many ‘parallel investigations are conducted each year as HMRC do not maintain, yet, a published category for these in its annual reports).

Parallel investigations are not “common”, but they are also not “new”. They can (quietly but powerfully), and do, happen and HMRC have deployed them historically in appropriate circumstances.

In short, a HMRC parallel investigation is an investigation in which HMRC simultaneously pursues both civil and criminal investigations (or indeed where HMRC conducts a tax investigation alongside other law enforcement or regulatory bodies) into the same individual.

This is separate and distinct from those HMRC investigations that have simply escalated from civil to criminal (though, of course, investigations can change over time and it can be difficult to always neatly compartmentalise investigations).

Unfortunately, despite growing interest, there is little in the way of publicly available information or guidance on parallel investigations. HMRC’s internal manual does cover this topic at (and only) SIOG6105 (NB, much other information contained within HMRC’s internal manuals is “withheld because of exemptions in the Freedom of Information Act 2000”).

SIOG6105 sets out HMRC’s approach to management of the risks of parallel investigations. That guidance states;

“The HMRC Legal Group Criminal Advisory team have advised that; it is possible for HMRC to conduct simultaneous criminal and civil investigations. In most cases it is not necessary to halt the issue of civil penalties due to ongoing criminal proceedings”.

That same guidance refers to a ‘Dominant purpose test’ which arguably gives some steer as to the area(s) in which HMRC believe risk exists. The guidance states;

“When progressing a civil or criminal investigation, it is important to ensure the correct power is used.

Officers need to consider the nature of their investigation when deciding which powers to use. The abuse of civil powers or any breach of the right to silence safeguards to obtain information where the dominant purpose is to gather evidence for a prosecution carries the risk that this evidence will be excluded.

Section 17 of the Commissioners for Revenue and Customs Act 2005 can then be applied to information that has been properly obtained. This states that:

“Information acquired by the Revenue and Customs in connection with a function may be used by them in connection with any other function”.

Therefore, information properly obtained as part of a civil investigation using a civil power can be put to further use as evidence in a parallel criminal investigation and vice versa”.

HMRC have therefore perhaps signposted the tax profession to a key aspect of parallel investigations (being the ‘dominant purpose test’) that should be carefully considered by all – more on that later.

Blurring of Boundaries

Modern tax enforcement needs both civil and criminal investigations, and in ‘parallel investigations’ HMRC clearly have a framework in which civil and criminal investigations can co-exist. However, this in turn has, arguably, led to a blurring of the traditional distinction between civil and criminal investigations. Put simply, the boundary is far less clear and tension between processes is, arguably, inevitable.

Tension is of course philosophical as well as procedural, however it’s the procedural that is important in the day-to-day management of HMRC investigations for clients. Philosophical debate about tax policy is important as it shapes the design of the tax system and what the law ought to be, but not for today.

Any tension between civil and criminal investigations lies fundamentally in the conflict of objectives, creating an inherent tension between HMRC’s use and/or misuse of its appropriate powers in deploying these powers in parallel.

Although civil and criminal investigations are governed by different legal frameworks and pursue different objectives, they are not hermetically sealed from one another. Information can be, and is, shared across the different workstreams. Again, referring back to HMRC’s internal manual SIOG6105;

“information properly obtained as part of a civil investigation using a civil power can be put to further use as evidence in a parallel criminal investigation and vice versa”.

The sharing of information between the two workstreams illustrates the blurred, but integrated nature of modern-day tax enforcement. The challenge is ensuring that civil powers are not used improperly as a means of gathering evidence for a prosecution, and more fundamentally that the integrity of each regime is preserved.

This potentially creates a dilemma, at least in the mind of the taxpayer. Full co-operation can/will mitigate penalties in a civil investigation, however that is then balanced with the risks associated in potentially self-incriminating (which is a right expressly afforded to individuals by Article 6 of the European Convention on Human Rights). Albeit COP9, in many respects, is HMRC’s attempt to reconcile the competing demands of taxpayer cooperation and protection from self-incrimination.

Ultimately, however, blurring of boundaries is nothing new, and in some ways it is natural tax evolution. Many tax practitioners will recall the historic distinction between ‘tax avoidance’ and ‘tax evasion’ and how much of the twentieth century centred on ‘legal vs illegal” making the conceptual boundary relatively easy to identify and therefore relatively straightforward. However, with the rise of aggressive and/or more sophisticated tax avoidance in the late twentieth century, tax avoidance arrangements increasingly occupied a grey area causing that traditional “legal vs illegal” distinction to become blurred and as a result, both HMRC and the tax professional had to adapt and respond to this shift in boundaries.

Future Trajectory of Tax Enforcement

HMRC’s current and ongoing enforcement trends are clear; increase and strengthen enforcement activity across the board. As highlighted earlier, the UK tax gap is 6.4%, equivalent to £59.2 billion. The government and HMRC recognise that there is more work to do to close the tax gap and is tackling this through (inter alia) an increased push on tackling tax and economic fraud.

HMRC has already taken steps since April 2025 to further tackle fraud and economic crime, including:

launching a strengthened reward scheme for informants targeting information on serious non-compliance in large corporates, wealthy individuals, offshore and avoidance schemes to encourage reporting of high-value tax fraud and tax avoidance.
delivering legislative changes to stop the use of fraudulent umbrella companies to help protect customers from being caught up in tax avoidance schemes that can often leave them with large and unexpected tax bills.
working with the Insolvency Service and Companies House to crack down on contrived insolvency, including abusive phoenixism, by increasing the use of upfront payment demands (securities), making more directors personally liable for company debts, and increasing the number of enforcement sanctions to double the amount of tax protected to £250 million by 2026 to 2027.

HMRC also recognise that tax advisers (and other intermediaries) can play a crucial role in closing the tax gap and since April 2025 HMRC has introduced a number of changes for intermediaries, one of which being stronger powers introduced for HMRC to tackle tax advisors who intentionally facilitate non-compliance in their client’s tax affairs. Arguably a much needed, and well overdue, sanction against “rogue” tax advisers.

However, none of us have crystal balls (unfortunately) and no-one can predict the future direction of HMRC compliance activity with absolute certainly. Nevertheless, recent trends in HMRC’s activity, its successes (and failures) can all steer to a likely future trajectory in the world of tax enforcement.

Some Statistics

Statistics can be carved up and analysed for whatever purpose is needed to be proved, and comparing statistics from one year to the next is not always possible, or meaningful. However, statistics can at least present a useful starting point as it is likely to give some indication of the overall direction of travel of HMRC in its enforcement and compliance activity.

HMRC’s most recent corporate report, published 9 July 2026, provides some interesting statistics on HMRC (specifically HMRC’s Fraud Investigation Service) activity in 2025/2026. We can look at this from a civil vs criminal investigation perspective.

Firstly, to put into context, total compliance yield generated by HMRC (or rather FIS), in 2025/2026 was £4,206m (subject to rounding). In 2024/2025 total compliance yield across FIS was £3,946m so a positive upward trajectory for HMRC.

FIS’ Civil Cases Statistics – 2025/2026

Of that total FIS yield, the civil investigation yield delivered £2,092m (just over £2 billion) in 2025/2026. This compares to £2,430m delivered in 2024/25.

That statistic is more interesting when broken down.

- Code of Practice 8* investigations accounted for £76.8m (so, c.37% of civil’s yield)

This compares to £48.1m in 2024/25

- Code of Practice 9 investigations accounted for £67.4m (so, c.33% of civil’s yield)

This compares to £96.7m in 2024/25

- 296 new COP9 cases opened in the year

This compares to 306 in 2024/25

- 191 new CoP8 cases opened in the year

This compares to 144 in 2024/25

*Code of Practice 8 is used by HMRC to investigate any situation where it is believed that there may be a significant loss of tax. So, this includes the affairs of individuals, partnerships, limited liability partnerships (LLPs), companies and trusts i.e. it has far greater breadth than COP9 that only investigates individual taxpayers, which may explain the percentages.

FIS’ Criminal Cases Statistics – 2025/2026

HMRC’s criminal investigation yield (i.e. the stopping and disrupting of fraud) delivered £2,114m in 2025/2026. This compares to £1,516m delivered in 2024/2025.

Again, that statistic is more interesting, however, when broken down further.

- 494 criminal investigations opened/adopted by FIS.

This compares to 446 criminal investigations opened/adopted in 2024/25 (a c.11% rise)

- 468 Positive Charging Decisions (PCD’s)**

This compares to 557 PCD’s in 2024/25 (a c.19% decrease)

- 260 Convictions

This compares to 281 Convictions in 2024/25 (a c.8% decrease)

- 84 custodial sentences, averaging 37 months in length

This compares to 141 custodial sentences, averaging 35 months in length in 2024/25 (a c.40% decrease)

- 79 suspended sentences, averaging 18 months in length

This compares to 109 suspended sentences, averaging 18 months in length in 2024/25 (a c.28% decrease)

**HMRC do not have the power to prosecute themselves. After they (HMRC) have concluded the criminal investigation, the matter is then referred to the independent prosecuting authority (in England and Wales), the Criminal Prosecution Service (CPS). Similar functions (to the CPS) are performed by the Public Prosecution Service in Northern Ireland and the Crown Office and Procurator Fiscal Service in Scotland. The CPS (England and Wales) considers the strength of the case put by HMRC and ultimately then decide if that individual will be prosecuted. A ‘decision to prosecute’ is a positive charging decision taken by the CPS to charge for tax related offences investigated by HMRC.

What do these statistic tell us, if anything?

In overall terms, HMRC/FIS yield is up which supports (in theory) an upward trajectory of increased and more targeted compliance activity generating increased yield. An important measure for HMRC and an important additional contribution to the Exchequer (although, it is noted that a parallel – excuse the pun – exercise has not been undertaken to compare HMRC’s cost base to determine whether this is all “profit”).

However, it is significant to note that whilst the proportion of that yield attributable to criminal investigation has increased from the previous year (a c.40% increase), the amount attributed to civil investigations has decreased (a c.16% decrease).

The number of criminal investigations opened by HMRC in 2025/2026 increased from the previous year, whilst the number of COP9 cases opened in the year decreased from the previous year (although it is noted that the number of CoP8 cases increased). However, whilst the number of criminal investigations opened/adopted is interesting insight, is not overly meaningful as, as noted in the NAO*** report dated 16 May 2025, HMRC’s overall policy has been to “reduce the number of prosecutions for all taxpayers in order to focus on high-value, high-harm fraud” i.e. it’s about high-value, not high-numbers.

***The National Audit Office (NAO) is the UK’s independent public spending watchdog, scrutinising public spending for Parliament.

HMRC make it very clear in publicising its criminal investigation statistics that “there is no correlation between adoptions, PCDs and prosecution figures – they are separate occurrences in a particular Financial Year and should not be read in conjunction with each other”. HMRC go on to say that “Criminal cases can be complex and involve several stages of detailed investigation and legal consideration. This can mean that cases take multiple years before being concluded and therefore outcomes achieved in any given year are not likely to be reflective of our activity in the same period. HMRC works in partnership with prosecuting authorities to progress our cases to conclusion through the criminal justice process”.

Essentially there is no meaningful comparison between the number of PCD’s each year and the number of criminal investigations commenced/adopted.

By way of illustration of that point, we should look at 2024/2025 and 2025/2026 collectively. Across those years HMRC commenced/adopted 940 criminal investigations. Across those same years there were 1,025 PCD’s, i.e. the CPS reviewed the evidence (put by HMRC) and determined that criminal charges should be brought against an individual in 1,025 cases. Therefore, looking at those statistics very narrowly (and without context), it could be argued that HMRC’s success rate in putting criminal investigation cases to the CPS is high – they are therefore meeting the overall objective of advancing criminal investigations where it believes that only a criminal sanction is appropriate.

However, we know that is not the case, and we know that many criminal investigations undertaken by HMRC fail for a variety of reasons.

All of this, it is reasonable to assume, leads us to predict a continued upward trajectory of criminal investigations. As criminal investigations increase, emboldened by a bolder and braver (and bigger!) HMRC, it is likely to be the case that so too will parallel investigations.

It is therefore more important than ever that tax advisers are equipped to deal with such investigations, and having some practical insight into these will be key in understanding how best to manage the process for clients.

Key Considerations – The Dominant Purpose Test

Whilst there are many considerations to be factored into responding to a parallel investigation, the “dominant purpose test” is the most important. The dominant purpose test is a legal principle used to determine the primary or prevailing purpose behind a transaction, arrangement, document, or communication when multiple purposes may exist.

One of the criticisms and concerns facing HMRC on its use of parallel investigations regards potential abuse of power, including in relation to obtaining relevant information, and this is a growing concern amongst the tax and legal community.

Obtaining information by use of the appropriate power is key. Failure, by HNRC, to use its Civil and Criminal powers appropriately (in gathering information during the course of a parallel investigation) may mean prejudicing an investigation and that case then “failing”.

But equally, for taxpayers it is imperative to understand that information (appropriately) provided to HMRC can and will be used for multiple purposes, and to understand the areas that HMRC could and should be challenged on. The ‘dominant purpose test’ is often misunderstood by taxpayers and advisors to be a blanket ban on HMRC being able to use information for multiple purposes. It is not. It is only the case that HMRC need to obtain the information by use of the appropriate power. Once that information has been obtained appropriately, it can be used for a variety of purposes, as SIOG6105 clarifies.

Practical Tips & Common Pitfalls

This list is in no way exhaustive or prescriptive, however some of the practical tips and common pitfalls to be considered in dealing with any HMRC investigation (whether civil, criminal, or both) are:

Regularly review HMRC’s use of its statutory powers – there are important legal and procedural constraints and safeguards governing what HMRC can and can’t do. Ensure these are appropriately adhered to.
Adopt a holistic approach to investigation management – tax is usually only one consideration but there are many others; reputational, regulatory, criminal, and legal for example.
Assess criminal risk from the outset – just because an investigation starts as a civil investigation doesn’t mean it will always remain civil. Continually evaluate risks and culpability.
Consider provision of information and documentation to HMRC carefully – especially so in parallel investigations. Co-operation is one of the most important factors influencing an outcome of an investigation; however, it is equally important to ensure that there is statutory basis and sound reasoning behind doing so. Be mindful also that information provided could have implications for any criminal investigation.
Ensure explanations and accounts given to HMRC are consistent – if there is one thing HMRC don’t like, it’s inconsistent explanations.
Assemble the appropriate team of legal and tax advisors and ensure a joined-up strategy between the two
Continually evaluate escalation risks – where an additional tax risk and/or behavioural risk is identified, don’t sweep it under the carpet hoping it will go away. It won’t. Proactive action will help shape the course of the investigation and manage risk.

Summary & key take aways

For the collective tax community parallel investigations present challenges. And the reputational, legal, and financial implications are high.

When acting for a client facing civil and criminal investigation, tax advisors will need to navigate a particularly challenging landscape and adopt a more holistic approach. The ‘traditional’ task of resolving a tax investigation is amplified by the evolution of HMRC’s tax compliance activity and emboldened approach to tackling egregious tax fraud.

HMRC’s ability to share information internally between its respective civil and criminal teams allows risks to be continually reassessed. Both escalation (of civil to criminal) of cases, and initiation of ‘parallel investigations’ is more likely in the context of a more assertive and focused HMRC. Taxpayers should never assume that a civil enquiry will always remain civil.

At the same time, however, parallel investigations can present opportunities for advisers to add significant value. Effective management of the process can help reduce uncertainty, preserve the client’s procedural rights, and ensure that relevant facts are presented accurately and consistently across the different civil and criminal HMRC workstreams.

An understanding of both the civil and criminal investigation processes is crucial, as also is the benefit of practical experience of managing, co-ordinating and resolving parallel investigations. Advisors with such understanding and experience are likely to be well placed to identify risks at an early stage, coordinate the combined strategies required for the different investigation processes.

A proactive yet cautionary approach at the earliest stage of any HMRC investigation can make a critical difference to the outcome of the investigation and the long-term consequences for those involved.