Accountants and legal privilege

Legal Professional Privilege and Accountants (This article is reproduced with the permission of the writer, David Winch FCA, MLRO Support Ltd)

Last month the Court of Appeal ruled on an issue of interest to accountants and lawyers and their clients.

In a nutshell, if a client seeks legal advice about his tax affairs from his lawyer that advice, and the communications to and from the lawyer for the purpose of obtaining that advice, are covered by common law legal professional privilege. That means that HM Revenue & Customs cannot require disclosure to them of the privileged documents by the issue of a notice under section 20 Taxes Management Act 1970 (now replaced by provisions within Schedule 36 Finance Act 2008) or similar legislation.

  

But what is the position if the client seeks that advice on tax law from his accountant rather than from a lawyer?

The Appeal Court ruled that common law legal professional privilege does not extend to advice, even legal advice, from accountants to their clients.  That means that HMRC are entitled to require disclosure of the documents.

The result is a disappointment for accountants, but not a surprise.

But it does not affect the statutory exemption from reporting suspicions of money laundering based upon information received in defined circumstances. That exemption, which is laid out in section 330 Proceeds of Crime Act 2002 (as subsequently amended), remains available both to suitably qualified accountants and to lawyers.