Court of Appeal Refuses to Extend LPP to Accountants

Legal advice privilege applies only to the legal profession

In 2009 the High Court heard a judicial review1 application by Prudential plc and rejected its claim that legal advice given by an accountant in a tax investigation was protected by legal professional privilege ("LPP") and, in particular, legal advice privilege. Prudential appealed this decision.

On 13 October 2009 the Court of Appeal handed down its judgment2 and dismissed the appeal. Prudential argued that taxpayers often approach accountants rather than lawyers for advice on tax liabilities, which then results in advice being given about the relevant law. It argued that a client's communications should be protected by legal advice privilege if the advice is given by an accountant in the same way as it would be if given by a lawyer. The Court of Appeal rejected this proposition.

Although this judgment deals with LPP in the context of tax advice, the Court of Appeal has recognised that the protections afforded by legal advice privilege should not be extended to other advisers outside the legal profession. The possible extension of LPP has been the cause of much debate within the legal and accountancy professions. Accountants, other professionals and non qualified tax advisers have long coveted an extension to LPP, so that their clients have the same protection as those advised by lawyers. But it is important to remember that, unless Parliament or the Supreme Court sees fit to extend LPP beyond the legal profession, the position will not be changed - legal advice from accountants is not covered by LPP, even if instructed via a law firm. Furthermore, accountants and others in the regulated sector have more stringent obligations to disclose information about their clients under anti-money laundering rules than lawyers. If clients are at all concerned about protecting confidential information, they should seek their legal advice from the legal profession.

Background to the decision

The claim arose out of a dispute between Prudential and the Special Commissioners/HM Revenue and Customs ("HMRC") in respect of a compulsory notice to provide relevant documents.

The Taxes Management Act 1970 affords various powers of investigation to HMRC, including the ability to serve notices on taxpayers and other third parties requiring the disclosure of documents and information which it reasonably believes are, or may be, relevant to the tax liability of that taxpayer (these powers have now been...

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