Dawn raids – what to do when HMRC come knocking

Last summer, it was revealed that HMRC has a policy of advising the Cabinet Office against giving honours to tax avoiding celebrities. It believes that public trust would be eroded if negative tax behaviours became linked to the positive recognition that accompanies the award of an honour. However, being overlooked for an honour is not the only danger for high profile celebrities and sportspeople. HMRC are currently proactive and out in force. Both celebrities and their advisers should therefore be aware of the very real possibility of a dawn raid.

High-profile targets

Simply put, HMRC wants taxpayers to be tax payers and not evaders. A way to promote this message is by pursuing celebrities who already have a media profile. Such a strategy is double-edged: if HMRC fails it does so publicly, but, if successful, it can piggyback the media interest and spread its message to a wider audience.

Last month, HMRC reported that 38 football agents, 40 football clubs and 173 football players were being investigated. It also recently sent warning letters to a further 2,000 football agents and, earlier this month, Cheryl Tweedy was the most recent celebrity linked to a tax investigation.

Advisers are targets too

The new corporate offence of failing to prevent the facilitation of tax evasion puts the advisers behind these celebrities at risk of investigation as well. Agents, tax advisers and wealth managers are right to be feeling nervous; they could be subject to dawn raids by HMRC, whose officers would turn up unexpectedly and seize their material.

Dawn raids

Powers of entry and search are available to a wide range of law enforcement bodies, including HMRC. In 2007, Harry Redknapp’s home was raided at 6am. Harry was not home, but his wife was. Harry reported that his wife called him and was hysterical; she had thought those conducting the raid were burglars. Whether the dawn raid is of your home or your office, it is still daunting!

Key advice for when it happens

If there is a knock at the door, how can you ensure that the investigators will not exceed the scope of their powers?

The short answer is that you must contact your lawyers as soon as possible. However, as there is no legal obligation for investigators to wait for your legal team to arrive before conducting a search, there are a number of steps you should take before your lawyers arrive.

• Have a procedure in place and a list of key individuals forming the internal response team (one of whom should be an IT professional). If not, assign one person to be the key contact with the investigators during the raid.
• If possible, the key contact should take the investigators to a meeting room. This will allow the investigators to discuss their search away from public areas of your office (and away from your files).
• Ask investigators to wait for your lawyers to arrive before they start their search (and offer them a coffee). Your lawyers will have given you a time by which they expect to arrive – let the investigators know this.
• Ask for a copy of all of the search warrants and/or the investigators’ authorisation documents. Check the scope of the documents; their search will be limited to what is permissible in them.
• Send a copy of the warrant and authorisation documents to your lawyers.
• Take a note of the names of all of the investigators who attend the search
• If the investigators refuse to wait for your lawyers to arrive, assign members of your staff to shadow them and to maintain a detailed record of everything, including the time when the investigators arrived, what areas they are searching and what items they are seizing. You could ask the investigators for permission to video the search. If you are asked to stop recording, stop, but ask why and make a note of the response.
• The investigators should not exclude you from the search unless there is a good reason to. If they ask you to leave the areas being searched, ask for an explanation and note it down.
• You and your staff should avoid becoming engaged in conversations. While the investigators should limit their questions to those necessary to enable them to conduct their search, there are no informal conversations during a raid.
• If there is, or might be, any legally privileged material in the areas that the investigators are searching, tell them where it is and that it is, or might be, privileged. If they continue to seize the privileged material, ask that it be kept in separate sealed envelopes
• Tell your staff not to obstruct the investigators and not to try to destroy, delete or hide any material or files. If they do, they may commit a criminal offence. Consider what you will tell your staff and whether it may be appropriate to send them home for the duration of the search.

The main advice is to stay calm and to call your lawyers immediately. The lawyers will be able to take the appropriate steps, make sure the investigators do not exceed their powers and to advise you on the legality of the warrant and the raid. More importantly, they can provide strategic advice on the next steps.