In a setback for the accountancy profession, the UK Court of Appeal has ruled that tax advice provided by accountants to their clients is not protected by legal professional privilege (LPP). LPP protects all communications between professional legal advisers and their clients from being disclosed without the permission of the client. The right to claim LPP is subject to strict conditions, because it deprives HMRC, tax tribunals and the courts of relevant evidence.
Lawyers representing PricewaterhouseCoopers and Prudential had argued that LPP should apply equally to tax advisers who are not legally qualified but Lord Justice Lloyd decided that, since the legislation distinguishes between advice received from solicitors or barristers and that received from other sources, only Parliament had the authority to extend the application of LPP.
Given the obligation of accountants to report to the authorities any suspicions they may have regarding tax irregularities, the ruling effectively discourages clients from asking their accountants for advice if they have any doubts about their tax affairs. A client taking such advice from his appointed legal adviser would not risk such a report being made. Michael Izza, chief executive of the ICAEW, was disappointed with the High court ruling saying "Taxpayers should be able to seek advice from those they believe are best suited to provide that advice, whether that be from a lawyer or a professionally qualified chartered accountant". The Institute will now consider the next steps in its campaign to extend LPP to tax advisers.