No legal professional privilege for accountants

The Administrative Court (Mr Justice Charles) has just handed down judgment in R (Prudential plc) v Special Commissioner of Income Tax [2009] EWHC 2494 (Admin). The Court rejected Prudential’s contention that tax advice from accountants (without formal legal qualifications) is protected by legal professional privilege from production under HMRC’s statutory investigation powers under the Taxes Management Act 1970 s 20 (now to be found in the Finance Act 2008 s 113 and Schedule 36).

This important point has been contentious for a long time. In R (Morgan Grenfell) v Special Commissioners of Income Tax [2003] 1 AC 563 the House of Lords had held (reversing the unanimous decisions of six judges below) that advice from qualified lawyers was so protected, and accountants, who of course give much technical tax advice, have understandably been anxious to ensure that a similar protection was available for their own advice.

The result of the case is to expose confidential advice from accountants to HMRC’s formal powers of investigation where that advice is or may be relevant to a taxpayer’s tax liability or its amount.

Prudential also unsuccessfully challenged the Special Commissioner’s opinion that the accountants’ advice about the tax planning scheme was relevant in the present case. This contention failed in consequence of a conventional application of the decision of the House of Lords in R v Commissioners of Inland Revenue ex parte T C Coombs & Company [1991] 2 AC 283.

Timothy Brennan QC acted for HM Revenue and Customs.

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