LPP decision was, regrettably, obvious

LPP decision was, regrettably, obvious

Mark Lee explains why the Court of Appeal had little choice but to reject the Prudential’s argument for legal professional privilege for tax advisers

I’ve long thought it unfair that lawyers and accountants are subject to
different rules when advising clients on tax matters. The distinction relates to
the facility afforded by the rules of legal professional privilege (LPP).

LPP is a common law right that has developed over the past 400 years. It is
intended to ensure that anyone can seek advice in confidence about their legal
rights and obligations and in particular advice about litigation or potential
litigation. Where LPP applies, the lawyer is not required to report or pass on
information to any third parties (eg: the police or HMRC). LPP also permits the
client to refuse to disclose documents or answer questions.

The problem is that this rule only applies to legal advice provided by a
qualified lawyer. Not when provided by accountants or tax advisers.

When the Prudential’s case went to the Court of Appeal the ICAEW, quietly
supported by the CIOT, intervened. This involved setting out arguments for the
Court to consider in reaching its decision. Unsurprisingly though, in my view,
the Court of Appeal has confirmed that LPP only applies to lawyers. I admire the
ICAEW’s attempts to persuade the Court that the rule should be extended. Legal
advice no doubt confirmed that such an attempt was worthwhile. And the members
would have been delighted by a successful outcome.

I’m no lawyer so may be accused of naivety in such matters. But my gut
feeling throughout was that there was no prospect of success. I take no pleasure
in finding out I was right. I could see no circumstances in which the Court
would, effectively, extend the range of advisers who could help tax cheats
escape prosecution. For that would be the outcome if the rule of LPP were

Clearly it’s wrong that different rules apply to lawyers and accountants when
advising on the same issues. It’s also wrong that tax cheats can secure advice
from anyone with the protection of LPP. But of course our legal system requires
the assumption of innocence rather than guilt – until proven. And that’s why the
courts consider LPP to be “a fundamental condition on which the administration
of justice as a whole rests.”

It’s not easy to see how the unfairness can easily be resolved. However,
let’s assume, for a moment, that the rules are changed and that accountants
(chartered or otherwise) can claim the protection of LPP as regards their
advice. There is another key difference between lawyers and accountants. The
former are trained in legal analysis and interpretation. The latter are not.

Of course plenty (but not all) accountants have an in-depth understanding of
tax law. But that’s only one aspect of the legal system. It hardly qualifies
accountants to emulate lawyers in the interpretation of wider legal principles
such as LPP and to properly understand when it does or does not apply. The
ICAEW’s failure to persuade the Court to extend the LPP rule may be a blessing
in disguise.

Mark Lee is chairman of the
Tax Advice
and Head of the
Director Network

Further reading:

ICAEW: Legal privilege rules “unsustainable

Tax advisers lose bid to extend legal

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