Disclosure imposed on tax avoidance schemes but lawyers retain privilege

The government bypassed the issue of legal privilege in tax avoidance schemes with the announcement today (Friday, 8 October) of a legislative amendment forcing disclosure.

The Law Society and the Institute of Chartered Accountants in England & Wales (ICAEW) have been involved in a stand-off over the question of whether lawyers should be accorded privilege in disclosing details of tax avoidance to the authorities, and exempted from making the disclosure.

Both the government and the ICAEW – in contrast to the Law Society – believed that lawyers should not have privilege in such cases.

Today’s amendment means that the disclosure must be made by one of the parties involved. If a lawyer believes that disclosure of tax avoidance is protected by legal privilege, then he need not disclose the transaction.

Instead, the onus is on the client to make the disclosure. Clients can also waive privilege and allow the lawyer to disclose information on their behalf.

Accountants will have to make disclosures themselves. But the ICAEW says that the amendment gives the accountancy profession broadly similar rights to lawyers, and has welcomed the announcement.