Staying within the limits of your retainer — Mehjoo v Harben Barker

The Court of Appeal has handed down its judgment in Mehjoo v Harben Barker [2014] EWCA Civ 358. Its decision will come as a relief to tax practitioners and professional advisers generally. The effect of the High Court’s decision in June last year had been that an accountant and tax adviser was found to be responsible for failing to advise his client to enter into a complex tax avoidance scheme. If the tax adviser did not have the requisite specialist knowledge, that was no defence. He should have alerted his client to the potential for further advice and referred the client to a specialist.

Overturning the High Court decision, the Court of Appeal has made clear that professionals’ obligations are limited to the instructions set out in their retainer letter. Varying those instructions will require either express agreement or a clear course of conduct that can, objectively, be inferred as having that effect. Occasional, helpful advice is not sufficient.

Mr Mehjoo, originally from Iran, became a British citizen in 1996. The claim was about capital gains tax (CGT) on the disposal of shares in his company. At the heart of the claim was an allegation that Mr Mehjoo retained ‘non-domicile’ status for UK tax purposes and could have entered into a scheme (the Bearer Warrant Scheme or BWS) to avoid CGT entirely. Mr Mehjoo contended that, as a reasonably competent accountant, Harben Barker had a duty to advise him that he may have a ‘non-domicile’ status that carried with it significant tax advantages and that he should therefore seek specialised tax advice…

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