Legal Privilege Setback For UK Tax Advisers

by Jason Gorringe, Tax-News.com, London

18 October 2010

The Institute of Chartered Accountants in England and Wales has announced that it is reviewing its options following the judgement in the case Prudential v HMRC, that legal professional privilege should not be extended to clients of non-legally qualified tax advisers.

Legal professional privilege is a common law right that has developed over the past 400 years. It is designed to ensure that any person can feel confident in seeking advice about their rights and obligations under the law and be reassured that any information they provide cannot be passed to a third party without their express consent. It currently only applies to clients of lawyers and extends to any tax advice they provide – despite the fact that the majority of tax advice is now provided by chartered accountants.

Commenting on October 13, Frank Haskew, Head of the ICAEW Tax Faculty, said: “Naturally we are disappointed with the decision announced today. This was an opportunity for the Court to decide that on public policy grounds there should be a level playing field for LPP. As it stands at the moment, the current position is anti-competitive for UK taxpayers and businesses. Whether they consult lawyers or chartered accountants, in our view clients who seek professional tax advice should be treated in the same way, irrespective of the qualification of the person.”

“We believe that the current situation is unsustainable and contrary to the public interest. However, the judges decided that they were bound by existing precedent and that only lawyers were entitled to LPP. As a professional body, we will be reviewing the options available to press the case for reforming the LPP rules so that there is a level playing field for taxpayers seeking tax advice.”

The latest decision follows an appeal by Prudential after it lost in the High Court in October 2009. Prudential had claimed that tax advice that it received from a firm of chartered accountants was protected by LPP. The High Court decided that when seeking tax advice privilege only covered the clients of lawyers and not the clients of accountants, and that judgment has now been supported by the Court of Appeal.

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