Clients beware. Only lawyers, and not accountants, have legal privilege when it comes to your tax advice.
My mother’s definition of a secret was that it was something you can only tell one person at a time.
Privilege, in the legal sense, isn’t that far off, except you just have to be really careful who you tell — and when it comes to tax advice, make sure it’s your lawyer and not your accountant.
Mother, look away now, as I digress into legal technicality for a moment to explain that privilege, as a matter of English law, typically falls into two sub categories: the first is litigation privilege and the second is legal advice privilege.
The former, broadly speaking, means that communications are privileged only if litigation is in progress or contemplated.
The latter, at least according to a recent ruling of the Supreme Court, means that communications subject to legal advice privilege (“LAP”) are broadly speaking privileged in all circumstances regardless of whether or not litigation is in progress or contemplation.
So it’s a bit like talking to your doctor — nothing you say can be used against you, and you might think the same when it comes to legal advice. So why worry? When is a privilege not a privilege? Well the answer seems to be, when you are anyone other than a lawyer giving tax advice.
This was the result of the further challenge by Prudential against the Court of Appeal’s ruling, which said that LAP is confined to advice given only by professionally qualified lawyers.
The decision was taken on an historic basis rather than a logical basis, as the rules relating to LAP have been well established for hundreds of years in both Common Law and Statute.
The layman might be forgiven for thinking that it was the nature of the advice sought and not the status of the advisor which should determine the question of privilege, but that would be his downfall — client beware. Only one of the seven Law Lords who decided the case came to this conclusion.
So is the end result lawyers one, accountants nil?
Michael Izza, the chief executive of The Institute of Chartered Accountants in England and Wales, said ‘the Supreme Court’s decision does not mean our fight is over. As a matter of urgency, Parliament needs to find a way to resolve how issues such as legal professional privilege are addressed.’
Are we now likely to see a sudden rush by accountants to get a law degree to maintain their supremacy in terms of market share in tax advice? So far, their clients have obviously not been deterred by the lack of privilege and the security it is supposed to bring.
As lawyers we can look forward to the rematch — but as Italy recently beat France in the Six Nations, anything is possible.