Share this content

Legal privilege and the tax adviser

Legal privilege and the tax adviser

In Taxation, Vol 163 No 4196 (05 March 2009), in the third and final of his (excellent) series of articles on HMRC's new powers to inspect premises, Keith Gordon confirms that
"... a letter from a (non-lawyer) CTA containing tax advice would not be exempt from disclosure to an HMRC officer".
In my dim and distant past I had to attend training on money-laundering regulations and was advised that if a taxpayer comes to us for advice about arrangements that might be reportable to SOCA, we as accountants were authorised to provide that advice (without reference to SOCA), under the supposed umbrella of legal privilege.

Either I have misinterpreted the course instructions or there is one definition of legal privilege for MLR purposes and another for the purposes of Sch 36 FA 2008.

I should be grateful if someone in the peanut gallery set me straight.

Clint Westwood


Please login or register to join the discussion.

05th Mar 2009 14:28

You may think I am splitting hairs but . . .

There is a difference between information received in 'privileged circumstances' and 'legal privilege' / 'legal professional privilege' / 'legal advice privilege' / 'litigation privilege'.

These are all technical terms with specific meanings.

The 'privileged circumstances' exception in relation to reporting to SOCA is available to a "professional legal adviser" or "relevant professional adviser" when information is received in 'privileged circumstances' in connection either with (i) the giving of legal advice by the adviser, (ii) the seeking of legal advice by the client, or (iii) in connection with legal proceedings or contemplated legal proceedings. (Note information received in connection with routine tax return or accounts preparation is not covered since this routine work does not amount to legal advice or legal proceedings.)

The others, 'legal privilege', 'legal professional privilege', 'legal advice privilege' and 'litigation privilege' only apply to solicitors and barristers.


Thanks (0)
05th Mar 2009 14:20

Oh, Cashew!
Now I'm right pistachio'd off.

Thanks for the detailed responses.

Thanks (0)
05th Mar 2009 13:46

Privileged Circumstances
The last UK case law for accountants stated that accountants and tax advisors could not enjoy privileged circumstances, what we have under PoCA is European legislation untested under UK law. ‘Bowman v Fels’ only tested privilege for the legal profession and not the extension of that to ‘a relevant professional advisor’. It came into the 3rd European Directive because of the European Convention on Human Rights. So technically it is not legal for an accountant/tax advisor is apply privileged circumstances in the UK, though in my opinion we quite rightly do.

The following is taken from the CIOT. Relevant professional adviser is defined in s 330(14) POCA as ‘an accountant, auditor or tax adviser who is a member of a professional body which is established for accountants, auditors or tax advisers (as the case may be): and which makes provision for
(a) testing of competence of those seeking admission to membership of such a body as a condition for such admission; and
(b) imposing and maintaining professional and ethical standards for its members as well as imposing sanctions for non-compliance with those standards.’

The legislation does not list the professional bodies which meet the criteria but the CCAB bodies, the Chartered Institute of Taxation and the Association of Taxation Technicians meet the criteria and hence their members may be considered to be ‘relevant professional advisers.’

The danger being that once this is tested in the courts it will mark the first stages of legislation for the profession as a whole, akin to the European system, a Tax lawyer and everybody else is classed as a bookkeeper.

There is an argument that the public has to be clear of the status of the firm they are seeking advice from. For example to rectify a previous evasive return;
1. A chartered firm with privilege, would not report them to SOCA and help deal directly to rectify the position and help mitigate the penalties according to circumstances, or
2. As the majority of firms are, not under privileged circumstances, would be obliged under PoCA to file a SAR and also then carry on and help deal directly to rectify the position and help mitigate the penalties according to circumstances,

The SAR will remain on the ELMER database for ever and a day, always ready to be crossed referenced over and over again just because the client could not make an informed decision of the accountant he chose. The situation needs case law clarification mainly because of the need to safeguard the rights of people under the Human Rights Convention. There are also questions concerning professional ethics and compliance

Steve O'Neill

PS I am probably being the monkey for David’s peanut

Thanks (0)
05th Mar 2009 16:48

Chuck me another peanut

You are not splitting hairs, the two heads of privilege (LPP) cannot apply to accountants. Privileged circumstance is in statute courtesy of the ML Regs, but is not in case law in the UK, the last precedent on this subject does actually state accountants cannot have information received in privileged circumstances.

I do not have the exact case to hand, it is at home, (sad!), however it was from an excellent article by Jonathon Fisher QC about the conflict between the Law Society Guidance and that of the Regulations. He also was in favour of case law in favour of the extension of privileged circumstances to the accountant/tax advisor.

However the problem with case law means clearer definition of the sector and quite probably statute retrospectivley to safeguard the public interest.

The question is should advisors now have an obligation to declare that they are or are not subject to privileged circumstance BEFORE they commence advising a client in circumstances that could be covered by privilege?

Steve O'Neill

PS I like dry roasted

Thanks (0)
05th Mar 2009 12:55



I know nothing about Sch 36 FA 2008.

However I can say with safety that the provisions relating to an exception from the requirement to report to SOCA information received in 'privileged circumstances' are exactly that. They apply only to the need (or not) to report suspicions of money laundering to SOCA. (In particular they do not extend the broader concept of 'legal professional privilege', enjoyed by solicitors and barristers, to accountants nor do they protect accountants' files and working papers from inspection by duly authorised - e.g. by a search warrant or production order - officers of HMRC or the police.)

Umbrella it ain't - a fig leaf would be a more accurate description (at the first gust of regulatory 'wind' all is revealed!).

Does that help?


P.S. You owe me a peanut!

Thanks (0)
Share this content