Number of freezing orders soar as HMRC cracks down on suspected criminal activity

Due to HMRC’s tough crackdown on suspected criminal behaviour, the use of account freezing orders (AFO) has increased by 170 per cent in the last three years.

According to data provided to RPC through a Freedom of Information request, the number of AFOs has increased from 125 in the 2021/2022 financial year to 341 in 2023/2024.

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

In addition, the number of confiscation orders has also increased over the same period, from 92 in 2021/2022 to 144 in 2023/2024, with the total value of assets seized approaching £23 million.

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

It was also pointed out that before the pandemic, HMRC issued only 381 account freezing orders between 2017 and 2021.

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

The order can apply to accounts with balances over £1,000 and is granted by the Magistrates Court. Because the hurdle is low, no senior magistrate or lawyer is required.

Not all freezing orders result in forfeiture. This only occurs if the court is satisfied that the seized funds originated from criminal activities or were used to facilitate a criminal activity.

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

However, Adam Craggs, partner and head of tax disputes at RPC, argues that the low hurdle to obtaining an AFO means this increase in HMRC use is potentially worrying.

“Since their introduction, we have seen HMRC use these powers with increasing frequency, even though we know that in many cases they do not lead to subsequent successful asset forfeiture or criminal prosecution,” Graggs explained.

He added: “While the money can be refunded, this is little consolation for the individuals and companies whose business activities are unduly disrupted by the freezing of their funds.”

Michelle Sloane, Partner at RPC, began by saying: “As AFOs and FOs become more common, it is vital that individuals and businesses are aware of their rights and know how to successfully challenge them.”

“Those affected should immediately contact a specialist lawyer who can advise them on the next steps to minimise the disruption to their private and business lives,” she added.