Freezing orders skyrocketed as HMRC cracks down on suspected criminal activity

HMRC’s use of account freezing orders (AFO) has jumped by 170 per cent over the last three years, due to its crackdown on suspected criminal behaviour.

According to data revealed to RPC in a freedom of information request, the number of AFOs has risen from 125 in the 2021/2022 financial year to 341 in 2023/2024.

The value of assets frozen by AFOs has increased from £43m in 2021/2022 to £57m in 2023/24.

Additionally, the number of forfeiture orders (FO) has also increased over the same period, rising from 92 in 2021/2022 to 144 in 2023/2024, when the total value of assets seized was close to £23m.

The data does not include Covid-era 2021 figures, however, it was reported in 2021 that over 2020/21, the tax agency issued 151 account freezing orders.

It was also noted that to date, before the pandemic between 2017-2021, HMRC issued just 381 account freezing orders.

The use of AFOs was introduced in 2017 under the Criminal Finances Act, which allows a court to order bank accounts to be frozen for up to two years while law enforcement investigate the source of funds and prevent disposal.

The order can apply to accounts with balances over £1,000, and are granted by the Magistrates Court. They don’t require a senior judge or a lawyer as the threshold is low.

Not all freezing orders will result in a forfeiture, which occurs only when the court is satisfied that the moneys seized are the proceeds of crime or used to facilitate a crime.

The data showed that in the 2023/2024 financial year, £14.5m of assets were returned which related to 75 account freezing orders.

However, Adam Craggs, partner and head of tax disputes at RPC argued that the low threshold for obtaining an AFO means that this rise in HMRC use is potentially concerning.

“Since their introduction, we have seen HMRC invoking these powers on an increasingly regular basis, even though we know that in many cases they do not lead to a subsequent successful forfeiture of assets or criminal prosecution,” Craggs explained.

He added: “While money can be returned, this is of little consolation for the individuals and businesses that see their operations unduly impacted as a consequence of their funds being frozen.”

While Michelle Sloane, partner at RPC started that “as AFOs and FOs become more frequent, it is critical that individuals and businesses are aware of their rights and how to successfully challenge them.”

“Those affected should immediately contact a specialist solicitor, who will be able to advise on appropriate next steps to minimise disruption to their lives and business operations,” she added.