THE BATTLE to extend legal professional privilege to tax advisors has been lost.
In the Supreme Court this morning, a panel of seven judges voted against allowing tax advisors' clients to take advantage of privacy protection by a margin of five to two. Currently, the privilege is only afforded to those of lawyers.
On his blog, ICAEW CEO Michael Izza called the decision "undeniably disappointing", but was comforted that two of the seven judges voted in favour of extending LPP.
"The Supreme Court believes that issues of extending legal advice privilege are a question for Parliament. In other words, the way to resolve this issue is by statute," said Izza.
Extending the privilege, the court held, would cause uncertainty over its scope and inconsistency in its application.
The case is the result of a tax dispute between Prudential and HMRC. In 2010, the Court of Appeal rejected claims by Prudential that, when advising on tax law, accountants should be protected by legal professional privilege.
The Supreme Court heard three days of submissions in November last year, in which Lord Pannick QC, acting for Prudential, observed Prudential were"not asking the court to change the law; we are asking it [the court] to identify and apply the current law".
However, in his submissions on behalf of the Law Society, Brick Court Chambers' Sir Sydney Kentridge QC noted that "the balance was struck already - once and for all - 400 years ago for a reason. The legal profession is a special authority in this field, regulated by the courts themselves".
However, one of the two dissenters today, Lord Sumption, held that in his opinion "it does not depend on the adviser's (sic) status, provided that the advice is given in a professional context".
Andrew Howell, dispute resolutions partner at law firm Taylor Wessing said the verdict is an unsurprising one.
He said: "The Supreme Court majority decided that to extend privilege beyond the legal profession would create uncertainty; and is a matter that should only be decided by Parliament.
"So the anomaly on legal privilege remains. The client can take the same advice from a lawyer or an accountant; but only communications with the lawyer will be privileged from future disclosure.
"There is obvious force in Lord Sumption's dissenting judgment, however. If the key to privilege is the nature of the advice which the client seeks, not the status of the adviser, why should privilege be the exclusive preserve of the lawyer?"
You may also like
AccountancyAgeInsight is a frequently updated resource centre for finance professionals, offering a free and easy-to-use digital library of briefings, white papers and other information resources.