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Legal professional privilege - Lawyers 5 : Accountants 2

Confidential legal advice is only protected by legal professional privilege if provided by a qualified solicitor, barrister or foreign lawyer according to Mark Spragg and Lucinda Russell-Jones. Legal advice from accountants or other advisers is at risk of disclosure, following a decision by the Supreme Court.


The rule of legal professional privilege ensures that legal advice and communications between a lawyer and their client remain absolutely confidential, and that advice cannot be disclosed to the court or third parties without the client’s consent.

This long-established principle was tested recently in a landmark case in which the Supreme Court, by a majority of five to two, has decided that legal professional privilege only applies to communications between qualified solicitors, barristers or foreign lawyers (including in-house lawyers) and their clients.

The Law Society had intervened in the Supreme Court case ofPrudential PLC and Prudential (Gibraltar) Ltd v Special Commissioner of Income Tax and Philip Pandolfo (HM Inspector of Taxes)which tested whether the principle of legal professional privilege can be extended to others operating outside of the legal profession. Prudential had asked the court to declare that legal professional privilege also protected the advice given by its accountants in relation to a marketed tax avoidance scheme, on the basis that the advice given was effectively legal advice although given by expert tax accountants rather than by lawyers.

The Supreme Court, in agreement with the Court of Appeal, emphasised that extending legal professional privilege communications to other professionals, such as accountants, was a matter for Parliament and not for the courts.

The ruling has considerable implications for both individuals and companies seeking professional advice on their tax affairs. In light of the recent scrutiny of tax mitigation arrangements, often depicted in the media as intrinsically dubious, the Crown Prosecution Service recently announced a drive against tax consultants and professionals adopting tax avoidance schemes. In recent months, HM Revenue & Customs (HMRC) have tended to enlarge the focus of investigations to include those individuals perceived to be taking advantage of tax planning arrangements that push the boundaries of legal tax avoidance. Now, not only the architects of schemes, or the tax consultants who promote them, but also the professionals who invest in them are at risk of being embroiled in a criminal investigation. Legal professional privilege will only apply to advice given when it has been given by a tax accountant through a firm of solicitors which will have been rare.

It remains to be seen whether bodies of professionals such as accountants will now seek to bring about a change in the law via the legislative process and whether there will be a distinction made between tax accountants giving what is essentially legal advice and more general accountants giving accountancy advice. It might be difficult to identify the boundary. Lord Clarke (one of the two dissenting judges), “hope[d] that the whole issue will be considered by Parliament as soon as reasonably practicable.”

The whole question of legal professional privilege should be looked at afresh in the light of modern professional practice and the way in which the provision of legal services is changing as a result of the Legal Services Act 2007 with the creation of multi-disciplinary practices. The recent decision raises interesting questions concerning how these multi-disciplinary practices will address professional privilege. Some view it as anti-competitive in reserving a marketable quality to lawyers, perhaps, without justification.

For the moment, the case presents a clear-cut choice for clients: if you want non-disclosable tax advice, you are better off going to a law firm.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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