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January 23, 2013 8:05 pm
The Supreme Court has refused to extend legal privilege to accountants offering tax advice, in a landmark ruling that means the long-standing principle of confidentiality will remain the preserve of solicitors and barristers.
The ruling, decided by a 5-2 majority, blocked an attempt by Prudential, the UK insurer, to withhold certain details of a 2004 avoidance scheme from the tax authority.
The judgment ends a long-running battle over legal professional privilege – the confidentiality of communications between a lawyer and a client – which many accountants consider gives an unfair advantage to the legal profession.
Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales, said the decision was “undeniably disappointing” but did not mean the fight was over.
Lord Neuberger, president of the Supreme Court, ruled that although the argument for allowing the appeal was strong, he was persuaded that “what we are being asked to do by Prudential is a matter for parliament rather than for the judiciary”.
Rupert Choat of CMS Cameron McKenna, a law firm, said: “Solicitors and barristers will welcome the judgment because it maintains their special status. The court has left it to parliament to legislate. As parliament is well-stocked with lawyers it has to be doubtful whether it will bother.”
The case stemmed from a tax avoidance scheme devised by PwC in 2004 and adopted by Prudential. It gave rise to a tax deduction in its Gibraltar subsidiary which could be offset against its profits.
Mr Izza said: “The current position on LPP is unprincipled and anti-competitive for individuals and businesses who, we believe, should be able to seek the best professional advice on the same terms whether from lawyers, accountants or indeed other appropriately qualified professionals.”
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