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Thanks to everyone for advice. Here is an update:
The policeman went back to them to ask for pictures of both the injury and where he got through and came back yesterday. The picture shows 2 puncture bites, which do look like a dog bite. Not dated.
Interestingly they gave the policeman a picture of the back fence, despite the fact they told us (before they called the police) that he had dug under the side fence. The dog can absolutely not get to the back fence as after the last time he was in their garden, my husband put a new fence crossways across the garden which he cannot get over or under or around. The policeman was once more putting a lot of pressure on me to sign his paperwork.
I have showed him the new fence, the quotes we have for a fence on our side and informed him that our pet insurance would cover compensation if she wanted to make a civil claim against us.
From the evidence they gave him they cannot prove my dog was in their garden, nor that it was him that bit her.
The policeman was very annoyed that I wouldn't sign and admitted that the whole thing was a waste of his time. However, he is going back to them to tell them we refute the allegations, and will come back next week to let us know how things are going to proceed