Prudential argued its case at the hearing in November where it defended the non-disclosure of documents relating to legal advice on tax matters it had received from accountancy firm PwC on the basis that they were protected by LPP.
HMRC demanded to see the documents because they related to a marketed tax avoidance scheme Prudential had entered. The revenue authority said advice from accountants is not covered by LPP.
The Supreme Court was asked to consider:
- whether under common law, LPP applies to communications between a client seeking and an accountant giving advice on tax law;
- the nature of the principles underlying LPP, the purpose of LPP and whether its application to advice on tax law from accountants would promote that purpose;
- the relevance of the Human Rights Act 1998 and the European Convention on Human Rights which Prudential contends prohibit HMRC from refusing to allow LPP for the legal advice from accountants on tax law;
- the scope of LPP under common law;
- whether only parliament should decide whether or not LPP should apply to legal advice on tax law from accountants; and
- the Court of Appeal’s decision in Wilden Pump Engineering Co v Fusfeld which held that LPP did not apply to patent agents, though the Supreme Courtis not bound by this decision.
The Supreme Court’s ruling will affect taxpayers and advisers.
If HMRC wins its case, lawyers will have a competitive advantage over accountants when advising clients on tax law.
This will hit taxpayers since, depending on the importance placed on LPP, they may be pushed towards seeking tax legal advice from lawyers rather than accountants even if an accountancy firm has greater expertise, simply to ensure LPP.
Read a full analysis of the ruling on ITR Premium's Tax Disputes section here.
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