Common sense has prevailed in the House of Lords after it reversed a Court of Appeal ruling made in March 2001, which required taxpayers and their accountants to disclose correspondence with their legal advisers.
The cases of Regina v Special Commissioner and Ex P Morgan Grenfell & Co Ltd, revolved around the rules of legal professional privilege.
Investment bank MG brought the case against the Revenue after being asked to disclose details of legal advice given to a client in connection with a property purchase.
MG objected on two grounds. First, that the documents were irrelevant as they showed nothing more than the opinions of the lawyers about the legal effect of transactions which had already been fully disclosed.
The second was that they were protected by legal professional privilege.
In making their ruling, the Law Lords said the inspector invoked his power under the Taxes Management Act 1970 and held that LPP is a fundamental human right.
The Revenue has yet to say whether it intends to make an appeal to the European Court of Justice.
It has been increasingly using its ‘section 20’ powers to demand documents and raid premises following a ruling last year that allowed the Revenue to override normal legal privilege.
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