UK: England and Wales: the accountant, legal professional privilege and tax law

Yesterday, in Prudential Plc & Anor, R (on the application of) v Special Commissioner of Income Tax & Anor [2009] EWHC 2494 (Admin), Mr Justice Charles held that where a person obtained skilled legal advice about tax law from an accountant, that advice was not subject to legal professional privilege (LPP). Disclosure of that advice could not, therefore, be resisted where this was sought by HMRC using its powers of investigation in respect of a commercially marketed tax avoidance scheme. His Lordship observed (paras [44], [64] to [67]):

... in my view the present law as developed, applied and understood is that for LPP to apply to legal advice and assistance it has to be given by a member of the legal profession with exceptions or extensions when the right or privilege arises in litigation, or when litigation is contemplated ...

In my view Prudential have put forward a compelling, and indeed unanswerable, case that in modern conditions accountants have the expertise to advise on tax law and it is firms of accountants, rather than firms of solicitors, who do give such advice and represent clients in disputes with the Revenue on many aspects of their tax affairs. Further many firms of accountants now employ lawyers to advise on tax and what they, and qualified accountants in the same firm, do in this context is the same ...

So, in my view, Prudential have shown that accountants do what lawyers are described as doing in the cases that establish LPP. This has been the case for some time and in my view an equivalent position can be said to exist in respect of other professions.

But, for the reasons I have set out, I have concluded that the cases do not provide existing authority that clients of accountants and other professions (apart for lawyers) have a right to claim LPP on the basis of legal advice privilege. Indeed it is accepted by Prudential that if I was to hold that accountants have such privilege this would be a first.

Although I acknowledge that the courts have power to develop the common law by the application of existing principle to modern conditions I am of the view that the conclusions I have reached and set out above mean that the doctrine of precedent excludes me from so developing the law".