HMRC information demands lead to compliance complications

HM Revenue & Customs (HMRC) are increasingly putting solicitors in impossible compliance situations as part of their ongoing crackdown on tax evasion and money laundering, according to a number of leading experts.

The taxman issued solicitors and accountants across the country with almost 1,500 demands for delicate information on clients last year – challenging law firms with a ‘Catch 22’ situation of compliance and disclosure complications.

HMRC’s criminal investigations unit has said that solicitors could face criminal liability if they fail to cooperate with an information request, yet law firms equally run risks of facing legal action from their clients if they decide to disclose sensitive personal data.

Over the past five years, more than 8,000 such orders have been issued. Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), said that the problems faced by solicitors were far from new.

“We’ve had a problem [with HMRC] for a long time anyway with money laundering reporting,” he said.

“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.”

A HMRC spokesperson said: “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 1,288 people – from investment bankers to tobacco smugglers and people hiding money offshore – charged with criminal offences in the same period.”

Experts believe that solicitors and accountants will continue to face complications in the near future, in light of increased calls for tax evasion crackdowns from senior officials.

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