Sahota & Sahota Solicitors Secures Discharge of Multi-Million Pound Account Freezing Orders for Travel Business
Sahota & Sahota Solicitors is pleased to announce a successful outcome in a case brought by HM Revenue & Customs, in which the firm acted on behalf of the Respondent (a large Travel Agency) before Ipswich Magistrates’ Court.
The case concerned Account Freezing Orders (AFOs) imposed by HMRC, which froze substantial sums, in excess of £4.5 million, held in the Respondents’ business bank accounts. HMRC alleged that there were reasonable grounds to suspect that the funds constituted “recoverable property” under the Proceeds of Crime Act 2002.
Background to the Application
The AFOs, were originally granted ex parte (without notice) which resulted in the company’s bank accounts being frozen for 6 months. This was based on several factors relied upon by HMRC, including:
- Significant cash deposits into a bank account across multiple branches and Post Office locations, some distance from the company’s registered business address.
- A high level of credit turnover (approximately £53 million over a 12-month period) through another bank account.
- Alleged discrepancies between turnover declared in Value Added Tax (VAT) returns and Corporation Tax filings.
HMRC contended that these features were inconsistent with the expected trading profile of a travel agency and gave rise to suspicion.
Outcome
Following detailed legal submissions, we were inviting the Court to conclude that:
- HMRC had failed to establish reasonable grounds to suspect that the funds were derived from, or intended for use in, unlawful conduct.
- The Respondents operate a longstanding and legitimate travel business with over 40 years of trading history and recognised industry accreditations.
- The financial patterns identified by HMRC, including cash deposits and high transaction volumes, were entirely consistent with a high-volume travel agency model.
Although the matter was initially listed for a contested hearing, it was adjourned due to lack of court time. The defence agreed only to a limited two-month adjournment to allow HMRC to complete its enquiries and consider its position. During this period, the defence also secured the release of one bank account from the Account Freezing Orders, enabling the company to continue trading and meet key financial obligations, including payments to IATA.
Following continued co-operation by the Respondents and constructive engagement with the defence team, HMRC expedited its investigation and, within three months, agreed to discharge the Account Freezing Orders in full, allowing the business to continue operating without restriction.
Strategic Defence
The defence advanced a comprehensive and multi-layered case, including:
- Demonstrating that the Respondent company is a bona fide, regulated business, accredited by IATA and ATOL, and subject to ongoing financial oversight.
- Establishing that cash payments are a legitimate and common feature of the travel sector, particularly for customers paying in instalments.
- Highlighting fundamental weaknesses in HMRC’s case, including the absence of any identified predicate offence or coherent theory of criminality.
- Clarifying that the company operates as an agent rather than principal, meaning that turnover and VAT figures relied upon by HMRC had been misinterpreted.
Protecting Business Continuity
A central issue in the case was the severe impact of the freezing orders on the business:
- The restrictions significantly impaired access to working capital, placing pressure on the company’s ability to meet supplier obligations and payroll commitments.
- It was argued that maintaining the freezing orders would cause irreparable commercial harm, for which compensation would not provide an adequate remedy.
HMRC’s Position Following Investigation
Following a full investigation, during which the Respondents engaged constructively and transparently with HMRC they confirmed that:
- There were insufficient grounds to justify any continued freezing of the accounts.
- Initial suspicions of tax evasion and/or money laundering were not substantiated, having been displaced by a detailed review of the financial and operational evidence, including the company’s non-conventional but legitimate business model.
Comment
Sundeep Kumar (Consultant Solicitor) instructed alongside leading King’s Counsel (Mr Baz Bhatia KC of 1 High Pavement Chambers), commented:
“This case highlights the importance of rigorous scrutiny when public authorities seek to freeze business assets. We demonstrated that the suspicions were not supported by objective evidence and that our client’s operations were entirely legitimate. The outcome ensures that a longstanding business can continue trading without unjustified interference.”
How we can help
Early advice and careful preparation make a real difference, particularly where there is a substantial risk to the continuity of your business if an AFO is made.
You can call/WhatsApp us on 01162555155.
You can visit us at Sahota & Sahota Solicitors, 25 New Walk, Leicester, LE1 6TE.
