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In delivering its judgment in the case of Prudential plc v Special Commissioner of Income Tax, the United Kingdom's Supreme Court has decided that legal professional privilege (LPP) should not be extended to clients of non-legally qualified tax advisers, but that the matter should be looked at by Parliament.
LPP is a common law right that has developed over the past 400 years. In other cases, the English legal system requires full disclosure from a party of all the documents which they have which are relevant to the matters at issue, but the privilege is designed to ensure that any person can feel confident in seeking advice about their legal rights and obligations, and be reassured that any information they provide cannot be passed to a third party without their express consent.
LPP currently only applies to clients of lawyers, and also extends to any tax advice they provide – despite the fact that the majority of tax advice is now provided by chartered accountants. Confidential tax advice passing between the latter and their clients will now still have to be disclosed as part of any litigation.
The Supreme Court's decision follows an appeal by Prudential after it lost in the Court of Appeal in October 2010, after being unsuccessful in the High Court a year earlier. Prudential had claimed that tax advice that it received from a firm of chartered accountants was protected by LPP, but this has again been rejected.
Extending the privilege, the Supreme Court held, would cause uncertainty over its scope and inconsistency in its application. Within the judgment given on January 23, the Court's President Lord Neuberger found that, although there was "a strong case in terms of logic" for extending the scope of LPP, "the consequences of allowing Prudential's appeal are hard to assess and would be likely to lead to what is currently a clear and well understood principle becoming an unclear principle, involving uncertainty."
He believed that "the question whether LPP should be extended to cases where legal advice is given from professional people who are not qualified lawyers raises questions of policy which should be left to Parliament."
Following the judgment, Michael Izza, Chief Executive of the Institute of Chartered Accountants in England and Wales, commented that "the current position on LPP is unprincipled and anti-competitive for individuals and businesses who we believe should be able to seek the best professional advice upon the same terms whether from lawyers, accountants or indeed other appropriately qualified professionals."
"The way in which legal services are provided is changing as a result of the Legal Services Act with the creation of Multi-Disciplinary Practices," he added. "As a matter of urgency, Parliament needs to find a way to resolve how issues such as LPP are addressed within these new structures."
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