UK Lawyers Set To Ignore New Tax Scheme Disclosure Rules

by Robin Pilgrim, LawAndTax-News.com, London

24 September 2004

Despite reassurances given by the UK government to the accounting community regarding the tax scheme disclosure requirements which will be imposed at the end of September, reports in the national media this week have suggested that lawyers are likely to effectively ignore the new regime, with the blessing of their professional body.

In a guidance note issued this week, chief executive of the Law Society, Janet Paraskeva suggested that in the context of a solicitor-client relationship, information on such tax schemes is likely to be privileged.

"Solicitors have a duty to keep their clients' affairs confidential. It should be made absolutely clear when they have to make a report under the proposed rules," she stated.

The Law Society's guidance note confirmed this, suggesting that a solicitor disclosing the information requested by the government under the new regime was "likely to be disclosing the substance of privileged communications passing between him and his client for the purpose of obtaining legal advice".

However, this conflicts with the interpretation of matters offered by Paymaster General, Dawn Primarolo in a letter to the Institute of Chartered Accountants of England and Wales on August 16. In it, she explained that:

"In developing the new disclosure rules, the Inland Revenue have, on a number of occasions, consulted leading Counsel and taken advice on the matter of LPP (Legal Professional Privilege). The Revenue’s position is that there is nothing in the disclosure regime which prevents lawyers from complying with the rules in the same way as accountants and other advisors. The rules require the disclosure of information on tax schemes and arrangements, whilst the effect of LPP is to protect legal advice which a lawyer provides to a client."

According to a Telegraph report, in addition to seeking to persuade the government to extend legal privilege to accountants and tax advisers in certain cases, the UK's main accountancy bodies have asked Chancellor Gordon Brown to step in, urging him to prevent the legal community from establishing an unfair advantage in this area.

Speaking to the UK newspaper, an Inland Revenue spokesman revealed that negotiations are ongoing, explaining that:

"We are still working with the Law Society to agree the extent of solicitors' disclosure obligations."

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