Confidentiality remains strictly for lawyers

The profession breathed a sigh of relief while the accountants did a double take when the Supreme Court ruled last month that legal professional privilege could not be extended to tax accountants.

The ruling, which went by a majority of five to two, was a win for the Treasury Devil, James Eadie QC of Blackstone Chambers, who was instructed for HM Revenue & Customs (HMRC) on its protracted legal battle with insurance giant Prudential.

The case concerned Prudential’s refusal to hand over to the tax authorities documents concerning a marketed tax avoidance scheme. The insurer had informed HMRC of the scheme but said it should not be forced to hand over the documents because such documents were covered by legal professional privilege.

HMRC disputed this and took the point to the Supreme Court.

Such was the ferocity of the battle that Pricewaterhouse-Coopers Legal partner Agnes Quashie instructed bar heavyweight David Pannick QC, also of Blackstone Chambers, to lead the defence.

In the Court of Appeal in 2010, Pannick argued that privilege is a judge-made rule so it was for the court to determine that it should apply when advice is provided, rather than who it is provided by.

It was a point which Supreme Court justice Lord Sumption, who dissented, picked up in his ruling. “The privilege is a substantive right of the client, whose availability depends on the character of the advice which he is seeking and the circumstances in which it is given,” he stated. “It does not depend on the adviser’s status, provided that the advice is given in a professional context.

It follows, on the uncontested evidence before us, that advice on tax law from a chartered accountant will attract the privilege in circumstances where it would have done so had it been given by a barrister or a solicitor.”

11KBW’s Daniel Stilitz QC said: “Prudential may feel it won the argument but lost the case.”

Osborne Clarke partner Peter Clough said tax accountants would be “crying into their soup, and tax lawyers will be dancing in the streets”.

He added: “The case presents a clear-cut choice for clients: if you want confidential tax advice, you’re better off going to a law firm.”