Taxman issues nearly 1,500 production orders last year to crack down on financial crimes
HMRC is in danger of causing ‘enormous business disruption’ for accountants by overloading them with demands to hand over information about their clients.
The taxman has issued 1,468 production orders between 2014 and 2015, demanding that accountants and lawyers release information regarding their clients that HMRC believe could be caught up in illegal financial activity, including tax evasion.
Over the past five years, the taxman has handed out over 8,000 production orders, a statistic which city law firm RPC believes has put accountancy firms in a tricky position, with failure to hand over client details or not enough information potentially resulting in criminal prosecution.
HMRC’s demands may also go against advisers’ duty of client confidentiality, and by handing over details it could lead to accountants being sued by their clients.
Adam Craggs, partner at RPC said that the orders can cause accountants ‘enormous business disruption’ when handing over information about their clients, including the man-hours required in order to review clients’ files for specific information.
“It can be very difficult to strike the right balance between providing HMRC with sufficient information and documentation to comply with the production order and not compromising client confidentiality by providing more information than is necessary.
“Most tax advisors and accountants will not be familiar with production orders and may be unsure of their obligations and what they should do when one lands on their desk. For example, they must not ‘tip off’ their client about an HMRC investigation. Such behaviour can have extremely serious consequences.”
Chas Roy-Chowdhury, head of taxation at the ACCA, is not surprised with the high amount of production orders from HMRC, explaining to Accountancy Age that accountants have already experienced similar problems from the taxman before.
“We’ve had a problem [with HMRC] for a long time anyway with money laundering reporting. Under money laundering regulations, if you suspect that there is something going on, you have to make reports about your clients. These figures just show that HMRC are taking things a step further,” said Chowdhury, who thinks that HMRC won’t be increasing the amount of production orders it hands out.
“At the end of the day it’s a resource issue isn’t it? With HMRC’s dwindling resources, how much more will they be expected to do?
“I think that might be a constraint, so I imagine that there won’t be an increase in numbers as there already a number of strands of legislation where client information is streaming to HMRC, such as DOTAS and country-by-country reporting.”
A spokesperson for HMRC commented: “Production orders are an important tool in HMRC’s fight against criminality and contributed to us protecting more than £2bn from attacks on the tax system during 2014/15.
“The work of our Fraud Investigation Service saw 1288 people – from investment bankers to tobacco smugglers and people hiding money offshore – charged with criminal offences in the same period.”