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24 January 2013 | Comment | Article by Richard Locke

Only tax advice given by lawyers is confidential

We consider the recent Supreme Court ruling in the Prudential case and how it impacts upon legal professional privilege.

Only tax advice given by lawyers (essentially solicitors and barristers) to their clients is confidential and will be protected by legal advice privilege, a form of legal professional privilege. That protection is denied to the same legal or tax advice emanating from any other profession, including accountants and other tax advisers.

Where litigation is involved, the position is different; provided the dominant purpose test is satisfied, then an accountant’s legal advice to his client will also be privileged.

Landmark ruling from the Supreme Court

In the case of R (on the application of Prudential plc and another) (Appellants) v Special Commissioner of Income Tax and another (Respondents) [2013] UKSC 1, the Supreme Court has refused to extend legal advice privilege to accountants offering tax advice, in a landmark ruling that means the long standing principle of confidentiality will remain the domain of solicitors and barristers.

The ruling, decided by a 5 – 2 majority prevented UK insurance company, Prudential, from withholding certain details of a marketed tax avoidance scheme from HM Revenue and Customs.

The judgment marks the end of a long battle over legal advice privilege – which is the confidentiality of communications between a lawyer and client – which many accountants consider gives a distinct unfair advantage to taxation advice given by tax lawyers to their clients.

“For confidential tax advice, you’re better off going to a law firm.”

Michael Izza, the chief executive of the Institute of Chartered Accountants in England and Wales said the decision was “undeniably disappointing.”

One commentator announced “The case presents a clear-cut choice for clients: if you want confidential tax advice, you’re better off going to a law firm.”

Following yesterday’s landmark ruling an HMRC spokesperson said “This is the latest in a series of important legal rulings which make it very clear that the principle of legal professional privilege applies purely to advice given by qualified lawyers.”

It remains to be seen when, or if, Parliament will address this issue. The International Association for the Protection of Intellectual Property called on the British parliament to legislate on the issue of legal advice privilege, “rather than leaving the matter to the court, which could only deal with the particular issue raised by the parties.”

Author bio

Richard Locke


Richard is a Partner and an elected partner on the firm’s board of management.  He is also Group Head of the ever expanding dispute resolution team at Hugh James. He conducts major commercial disputes frequently with an international flavour including commercial claims, mining disputes, shareholder and partnership disputes, professional negligence claims, contentious IT disputes, injunctive relief and insolvency.

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