HMRC is increasingly making demands for confidential information from professional firms on their clients it suspects of tax crimes.
There has been a 19 per cent jump in HMRC requests to have access to confidential information on clients it wants to investigate for suspected tax crimes, according to research carried out by law firm RPC.
The number of requests hit 1,507 in 2016/17, up from 1,276 in 2015/16, according to HMRC figures obtained by RPC.
Adam Craggs, partner at RPC, said while it is quick and easy for HMRC to issue these orders, it creates a huge burden on professional services firms.
He added: “These investigations can take several years to complete and can cause serious business disruption to both suspects and their professional advisers.
“It is important that anyone who receives a production order seeks legal advice from a lawyer with the necessary expertise in this area as soon as possible.
"The consequences for professional advisers who either fail to comply with a production order, or provide information to HMRC which they are not required to hand over can be very serious.”
HMRC’s Criminal Investigation Directorate can seek a ‘production order’ to compel professional services firms, such as accountants, to disclose confidential information relating to their clients who are suspected of tax fraud.
RPC said firms issued with a production order can struggle to balance the need to provide HMRC with the requested documentation while ensuring they do not breach their duty of confidentiality owed to their clients.
Firms can face criminal liability for failing to comply with a production order, but they also risk a legal claim from their clients if they provide too much information to HMRC.
In 2015, HMRC was given an extra £800m in funding to help meet a target of tripling the number of criminal investigations into tax crimes by 2020.
This has resulted in firms facing an increased threat of criminal investigation as HMRC looks to sharply increase the number of criminal convictions it secures.
Gemma Siddle, chartered financial planner and director of client services for Newton Aycliffe-based Eldon Financial Planning, said: “I think it’s vital that HMRC has the power to do this should they have any inkling of suspicious activity.
"However, in practice HMRC investigations are typically lengthy and this causes a lot of distress and uncertainty to those involved.
"Personal financial planning can be difficult if a client is tied up into a case even if they aren’t the direct subject.
"Whilst the powers and authority of HMRC are required to ensure a safe financial system in which we all have confidence, it would be helpful for all if HMRC had the resource to move their investigations at a quicker pace.”
