Stand And Deliver!

ADAM CARTWRIGHT looks at the adviser's role in dealing with an Inland Revenue search operation.

INLAND REVENUE SEARCH operations take place under the statutory authority of section 20C, Taxes Management Act 1970, and they will only be carried out by the Revenue's Special Compliance Office. This is a specialist head office group within the Inland Revenue which investigates cases including those where serious fraud is suspected. There are nine Special Compliance Offices in England, Scotland and Wales. Most forms of suspected serious tax fraud will be considered fair game for a search operation, and the investigation will be dealt with by the prosecution group of Special Compliance Office.

The prosecution group may also have searches carried out by the police under section 8, Police and Criminal Evidence Act 1984. These powers will normally be used in cases considered to be relatively small and are generally not favoured by Special Compliance Office because its officers have no power to participate in the search. This article concentrates on the section 20C operations, where searches are carried out by Special Compliance Office officers rather than the police.

Thorough preparation

Special Compliance Office prepares very thoroughly prior to a search operation. The investigator will prepare a lengthy report (referred to as an information) which summarises the case in detail and which will eventually be sworn before a circuit judge (a sheriff in Scotland). A presentation will be made to a senior strategy team within Special Compliance Office which will make the final decision to go ahead.

The client under investigation is likely to be the target of surveillance by Special Compliance Office before the search operation to ensure (among other matters) that he is still living and working at his last known addresses. The investigator will need to decide which premises connected with the client should be searched and how many officers will be needed at each location; when he swears the information, he will ask the judge to sign search warrants for those locations. A team of officers will receive a detailed briefing the day before and will be informed particularly of key documents which the Revenue expects to find. The knock on the client's door almost certainly will be the first the adviser or the client hears about the search operation.

The search

The procedure on the day follows a fairly set pattern. The client's home address and those of any other key suspects will be visited invariably at 7 am. Business premises and any other locations will normally be raided closer to normal business hours. Where an arrest is intended, police officers will also be present (usually two) since the Revenue has no powers of arrest. In a minority of cases, police officers may be present where no arrest is intended in order to prevent a possible breach of the peace. It is unusual for Special Compliance Office to force entry to premises, but the search warrant may permit them to do so if necessary. Once an arrest has taken place, it is unlikely that any police officer will remain on site.

Initially, two Special Compliance officers (the search team leader and a note-taker) will accompany the police on to the premises. Once the arrest has taken place, the team leader will serve the search warrant. The search may now commence, but Special Compliance Office usually prefers to have the client removed to the police station before this happens. The search will be under the control of the team leader, but ultimately he will take instructions from a control room at the Special Compliance Office. The control room is staffed by senior investigators and Revenue solicitors.

The composition of the search team will be governed by the size and nature of the premises, but for an average home address seven or eight officers (including the team leader) can be expected. The numbers allocated at a business address will vary according to the size of the premises.

Special Compliance Office officers are not likely to be keen on the client making a telephone call to his adviser, but there is nothing to stop anybody else at the address from doing so. At this stage, the adviser may well wish to obtain the services of a specialist investigation consultant.

Initial vital action

The key matters which must be addressed are as follows:

• The adviser should speak to the team leader as soon as possible, by telephone if necessary, and suggest that the search is delayed until he arrives.
• A copy of the warrant will always be left on the premises. Has it been signed by a judge? It will state how many officers are permitted on the premises. Are there any more present? Revenue warrants will not specify a date on which the search is to take place, but they will be valid for 14 days, so the warrant date should be checked. If there are any inconsistencies, the adviser should challenge the warrant, but he should not interfere with the search itself.
• Has the client been arrested? If so, what are the grounds for his arrest? The arresting police officer will probably have given a broad statement such as 'tax fraud'. The leader of the search team is unlikely to provide further information, but the name and contact details of the person in overall charge of the investigation will appear on the warrant.
• If an arrest has occurred, the client should be advised to remain silent until legal advice is available; he should not answer (or be asked) any questions about the case beforehand. If the Revenue wants to interview him formally, it will do so in the form of a taped interview under caution at a police station. In practice, it is unlikely that anybody other than the team leader will speak to the adviser or the client since Special Compliance officers are normally advised not to enter into such discussions.
• Are the interviewing officers present? Sometimes they may attend the start of the search operation. They will probably have with them copies of any documents they intend to show the client at interview. The adviser should ask to read through the copies, as they will indicate the likely direction of the Revenue's questions. An interview can be expected in most cases.

Special Compliance Office officers cannot prevent the adviser from attending any search location. However, the Police and Criminal Evidence Act restricts who can attend a police station; only a legal representative (or an appropriate adult, family member or social worker, where appropriate) may be present during an interview. It is quite likely that the interview will start while the search is still in progress, although timing is dependent on the arrival of the legal representative.

The client may have been asked to sign an agreement permitting the 'imaging' of any computer under his control, whether on the premises or elsewhere. The warrant should be checked to ensure that the proposed search of the computer is covered, especially if the Revenue wants to search computers sited elsewhere. It is worth bearing in mind that the searching of computer material may take longer than a physical search of the premises.

All day experience

The experience of a search operation will be upsetting for the client's family, employees and associates. The search will be thorough, and it is quite likely to last all day. Officers will identify documents to be seized, which will be placed in sealed bags. They will enter descriptions of the items seized onto duplicated log sheets, and a copy of those log sheets must be given to the occupier.

Most warrants run from 7 am to 10 pm, but a judge may agree different times, and the Revenue may seek time extensions to existing warrants. The Revenue may also seek additional warrants for further addresses either on the day of the search or after.

Advisers' premises

Until recently, search warrants would be routinely sought for the premises of an accountant (or a solicitor or bank). Such action was quite rightly felt to be unnecessarily draconian, and the Revenue's practice tended to be to serve the warrant formally, but to ask for the documentation it sought without carrying out a search. Since November 2000, the Revenue has had a new production power which enables it to obtain original documents; this power should only be used by Special Compliance Office.

On the same day that searches of suspect premises are made, the Revenue is likely to serve a number of notices of intention under section 20BA, Taxes Management Act 1970, to apply for a production order on a professional adviser. These notices may be served either by post, or more commonly by a Special Compliance officer in person. It will specify the original documents which the Revenue requires, and the presence of the Special Compliance officer on the premises may well lead to the documentation being provided voluntarily that day.

Practitioners should not feel compelled to hand over papers immediately; the Revenue will have arranged a hearing date in the High Court when it will seek to obtain an order for the production of documents, and in terms of client relationship it may be better to take that course. If Special Compliance Office considers that the adviser is also implicated in suspected fraud, then a search warrant will still be obtained. Such notices may be issued at any time during a Special Compliance Office investigation.

Outcome of interview

The client may be charged with offences at the end of the interview, or he may be released on police bail, normally 'pending further investigations'. In cases where the client is not charged, Special Compliance officers will want to resume the interview under caution once they have had an opportunity to review at leisure the documents seized. The interview may therefore be continued when the client reports for police bail, normally about a month later, although Special Compliance Office may delay that process further. In that time the client should be prepared for the interview:

• Discuss the next moves with the client's solicitor.
• Review the log sheets of the documents seized.
• Ask for a transcript of the interview under caution.
• Meet the client and ensure that there are no surprises when he is next interviewed.

Finally, remember that even though a search operation has taken place, the client may not ultimately be charged. For charges to be brought, the investigator must prepare a further report which must be approved by the Board of Inland Revenue, and that approval is not automatic.

Harrowing experience

Inland Revenue search operations are relatively infrequent, but when they occur they are likely to be a harrowing experience for the client, and their impact can be far reaching. Practitioners must be aware of the issues, and may be advised to take specialist advice.

Adam Cartwright is a consultant in the tax investigation group at WJB Chiltern plc. He can be contacted on 020 7446 6989, e-mail: cartwrighta@wjbchiltern.com.

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