Client Confidentiality – Production orders & accountant’s dilemma

Could client confidentiality be put at risk?

An accountant receiving a production order from HMRC faces a dilemma over their duty to clients and client confidentiality in particular.

HMRC issued nearly 1,500 production orders under Schedule 36 FA 2008 last year, and a total of around 8,000 in the last five years.

HMRC require information about clients

The information notices require accountants and other professional services firms to supply information about clients or former clients suspected of criminal tax evasion.

Under the legislation, HMRC can issue a notice requiring the production of information or documents “reasonably required” for the purpose of checking the tax position.  Failure to comply with HMRC production orders can result in penalties being imposed.

HMRC has said that: “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.”

Firms not complying with a production order can face prosecution

As many orders come with a relatively short deadline, complying with the order can be difficult for smaller firms.  Client confidentiality is paramount to accountants but firms that do not comply with such an order, can find themselves facing criminal prosecution.  They could also face prosecution for providing too little information to HMRC.

On the other hand, supplying more information than HMRC has the right to require could lead to legal action against the practice by their client.  Deciding how to respond to a notice may not always be easy and the potential costs of making an error are very high.

The time costs for complying can also be high because HMRC may ask for a considerable amount of information or documentation. It is unlikely that practices will be able to bill such costs to clients.

Practices with Vantage Fee Protect Tax Fee Protection cover will have no such problem or dilemma with client confidentiality because Schedule 36 is covered by our policy.

For more information, please contact us on email or call 0116 274 9123.

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