The recent surge in investigations into tax avoidance has seen a giant leap in the issuing of production orders by HMRC. Production orders are given to companies and businesses in the UK to demand information on clients who they suspect are included in criminal activity. They’re issued under HMRC’s Investigation Directorate, which was brought into effect during 2014-2015. They’re to help aid investigations into tax evasion and money laundering.
Any business or firm who receives a production order must provide information in a short period of time, given by HMRC. However, this puts auditors and accountants, especially those from smaller and newer firms and businesses, into a difficult position. On top of the time scale, companies and individuals who provide the information must be careful. They must respect client confidentiality, yet respect the production order, which they must oblige by law. Giving away too much information can lead to implications with clients. However, giving away too little information, or telling the client about the production order, can land serious fines from HMRC. Adam Craggs, partner at RPC, said: “Production orders can cause enormous business disruption for those who are unfortunate enough to receive one and raise difficult compliance issues. Deciding what is and what is not covered by a demand is not always easy and the potential cost of making a mistake is very high.
Over 5000 production orders have been issued over the past five years, with more expected to be imposed in coming years. This is because HMRC have discussed overhauling the way they handle investigations, specifically after the panama papers leak earlier this year. It’s expected that the government agency will investigate over 20 wealthy individuals and companies a year. Production orders will significantly help these investigations. 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 1288 people – from investment bankers to tobacco smugglers and people hiding money offshore – charged with criminal offences in the same period.”