Revenue heads off clash between professions

Links: Plans for privilege ‘useless’

and Tax avoidance row escalates

The government has bowed to pressure, and could introduce legislation as early as next week to end the bitter row between accountants and lawyers over reporting tax avoidance schemes.

Accountancy Age has learned that the burden of responsibility for reporting tax avoidance schemes will be shifted onto lawyers’ clients, neatly sidestepping the Law Society’s insistence that its members should not have to report under the disclosure scheme because they possess legal privilege.

The latest changes have been laid out in a draft statutory instrument and are expected to be put to paymaster general Dawn Primarolo (pictured) by the weekend.

The news will offer a huge boost to accountants, who were outraged by Law Society advice issued to solicitors last week. It said they were under no obligation to disclose tax-avoidance schemes to the Inland Revenue because of their status under legal professional privilege.

One accountant close to the discussions, said the draft statutory instrument was a good way to deal with the problem: ‘From an accountant’s point of view, this is really good news,’ said the source who asked not to be named.

The Law Society’s advice prompted an angry response from the Consultative Committee of Accountancy Bodies, which wrote to chancellor Gordon Brown expressing its ‘extreme concern’ that the legal profession would be put at an unfair advantage.

Aidan O’Carroll, head of tax at Ernst & Young, reflected the views of manny accountants when he said the Law Society’s advice would ‘drive a coach and horses through the tax-avoidance disclosure regime’.

The Revenue sought counsel from one of the country’s most respected and experienced QCs over its proposed solution, and Accountancy Age understands that it has already gained approval from the major law firms.

‘We are working with the Law Society to try and resolve this amicably,’ said a Revenue spokesman, adding it was ‘hopeful of reaching a resolution before it reaches court’.

Should the statutory instrument receive ministerial approval – as seems certain – and avoid major condemnation from the Law Society, the Revenue will have achieved a major victory.

The Law Society declined to comment on the latest proposed solution.