Finance Bill – Revenue can seize client papers

The government has confirmed the Inland Revenue’s power to seize legal papers, held by accountants and other advisers, that contain advice to clients disclosing the purpose of a transaction, write our parliamentary staff.

Economic secretary Patricia Hewitt said where a document contained facts and legal advice, the Revenue would not insist on disclosure, but only ‘provided it does not form part of the relevant facts – for example, the purpose test in anti-avoidance legislation might be relevant’. She said that otherwise it would be possible ‘and perfectly reasonable’ to delete those parts of documents in submitted copies.

Hewitt was resisting a Tory bid during debates on the Finance Bill to provide immunity for advisers who refused to provide material ‘which he would be entitled to refuse to disclose, produce or furnish on grounds of legal professional privilege in proceedings of the High Court’.

Shadow chief secretary and Tory accountant MP David Heathcoat-Amory proposed a new clause making it clear that the Revenue could not obtain legally-privileged documents.

He urged that it should be the Commissioners, not the Revenue, who would decide if a particular document was factual and liable to be produced or not.

But Hewitt said: ‘The exchanges between lawyer and client may disclose the real purpose of a transaction in circumstances where the Inland Revenue needs to make up its own mind about whether anti-avoidance legislation, which turns on the purpose of the transaction, applies.’

Heathcoat-Amory retorted that Hewitt’s view ‘is not shared by practitioners who deal with those tax matters’, but his clause was defeated.

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