HMRC tax investigations: why you should speak to a lawyer first - Kuits Solicitors Manchester
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HMRC tax investigations: why you should speak to a lawyer first

HMRC tax investigations: why you should speak to a lawyer first

30 Oct 2019

The pressure on HMRC from the government to increase the number of criminal prosecutions for tax evasion is mounting. In 2010, the government gave HMRC £900m to combat non-compliance in the tax system; subsequently, the number of convictions from HMRC prosecutions increased by 93%. This has also led to a rise in the number of production orders (POs) sought, which enables HMRC to obtain information from accountants or tax advisors in relation to their client’s affairs.

What is a production order?

HMRC is able to apply to the Crown Court for a PO against third parties (such as accountants, tax advisers and banks) in a criminal investigation to request potentially incriminating material regarding their clients’ affairs under the Police and Criminal Evidence Act 1984.

Once obtained from the court, the PO requires the third party to provide HMRC with the requested material within the specified timeframe.

Does my accountant or tax advisor have to comply with a production order?

HMRC will frequently insist that the material is provided within a relatively short timeframe. Failing to comply with a PO can lead to a custodial sentence and/or a substantial fine.

What information will be provided to HMRC on my affairs?

Deciding what is and is not covered by a PO can be tricky for an accountant or tax advisor as they are not covered by legal professional privilege. There have been recent cases where an advisor has provided HMRC with too much of their client’s information and then faced action from their client for a breach of confidentiality. On the other hand, there have been cases where an advisor has withheld information from HMRC, leading to further trouble down the road for all parties.

HMRC has been seeking to use POs to obtain information and full client files from accountants who have advised clients in relation to HMRC criminal investigations in recent months, including under Code of Practice 9.

What is legal professional privilege?

It was confirmed by the Supreme Court in a recent case that common law legal professional privilege does not apply to any professional other than a qualified lawyer. Legal advice privilege allows communications between lawyers and their clients made for the purpose of seeking or giving legal advice to remain confidential.

This means, without having a suitably experienced lawyer involved early on in the criminal investigation, all communication between non-lawyer professionals and their clients are potentially disclosable.

In order to avoid HMRC obtaining access to such information, taxpayers and their professional advisors are therefore recommended to engage a legal professional so they can suitably advise and assist with the process and ensure for their client the protection that legal professional privilege provides.

To find out more about legal professional privilege in relation to your tax affairs, please contact us.

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