LONDON Jan 23 Advice by accountants cannot be
kept secret in the same way that legal counsel is confidential,
Britain's Supreme Court ruled on Wednesday in a blow to attempts
by UK insurer Prudential to keep details of a tax avoidance
scheme hidden from the taxman.
The ruling comes at a time when public anger over corporate
tax avoidance is running high in Britain and parliamentarians
are considering changing the law to make it harder for the likes
of Starbucks or Amazon to use inter-company
transactions to cut their tax bills.
By a 5-2 majority, judges rejected Prudential's
argument that legal advice by qualified professionals like
accountants cannot be disclosed without the client's consent, in
the same way that discussions with lawyers are protected.
The ruling means that firms will not be able to duck out of
producing documents requested by tax inspectors by invoking an
ancient right of confidentiality.
The case stemmed from a tax avoidance scheme devised by
PricewaterhouseCoopers (PwC) in 2004 and adopted by Prudential,
which later refused to hand over documents to the taxman on the
basis they contained advice from PwC which was protected by
legal professional privilege.
Developed over hundreds of years in English common law, the
rule of legal professional privilege means that communications
between lawyers and their clients are absolutely confidential.
"The consequences of allowing Prudential's appeal are hard
to assess and would be likely to lead to what is currently a
clear and well understood principle becoming an unclear
principle, involving uncertainty," wrote David Neuberger,
president of the Supreme Court, in the ruling.
He said the case raised issues of policy which should not be
decided by a court but rather by parliament.
Prudential and PwC declined to comment on the ruling.
"Accountants will no doubt think it is unfair, as it will
drive clients concerned about maintaining confidentiality in
advice provided to them into the welcoming arms of law firms,"
said Peter Clough, head of disputes at international law firm
The Institute of Chartered Accountants in England and Wales
(ICAEW), the main professional body representing accountants,
said the ruling was "disappointing" but not the end of the road.
"The current position is unprincipled and anti-competitive
for individuals and businesses who we believe should be able to
seek the best professional advice upon the same terms whether
from lawyers, accountants or indeed other appropriately
qualified professionals," said Michael Izza, chief executive of
"The Supreme Court believes that issues of extending legal
advice privilege are a question for parliament ... So for us,
the work on getting equal treatment for our clients moves to the
political field, rather than the legal courts," he said.
The Law Society, which represents solicitors, said the
Supreme Court ruling had protected an important human right of
"A lawyer's duties and responsibilities to the client and to
the courts are not available on a pick'n'mix basis," wrote
Desmond Hudson, chief executive of the Law Society.