Advisers for accounting and legal professional bodies are awaiting a verdict from the Court of Appeal in a case that could determine whether tax advisers can claim legal professional privilege.
The appeal of Prudential PLC and Prudential (Gibraltar) Limited v Special Commissioner of Income Tax and Philip Pandolfo (HM Inspector of Taxes) follows the October 2009 decision in favour of HMRC in which judge Charles ruled that legal precedents linked legal privilege to solicitors only, and did not extend to tax advisers, even where they were offering opinions on tax law.
However, he left the door open for an appeal by noting that in the current market, firms of accountants regularly provide such advice and that there was merit in the argument in favour of a “level playing field” between the professions.
Prudential declined to comment on the proceedings, but triggered what has become a test case between the two professions when it sought a judicial review of HMRC enquiry notices. The insurance company argued documents sought by HMRC were protected by professional privilege and did not contain relevant information on its tax liabilities.
Both the Law Society and the ICAEW then sought leave to intervene in the case and presented many of the key arguments at the Court of Appeal hearing last week.
The institue’s contention is that the principle underlying legal advice privilege should apply with equal force to tax advice, and that there is no principled distinction to be drawn between lawyers and chartered accountants, who both operate under similar professional controls and ethical responsibilities.
“The case has the potential consequence of giving anyone who describes his/her self as a tax accountant or other professional the ability to withhold vital information from bodies such as HMRC, when legal professional privilege is intended to have a very specific purpose,” warned Law Society president Robert Heslett.