Hossein Mehjoo v Harben Barker & another [05.06.13]

High Court confirms accountants should advise wealthy clients on potential tax avoidance schemes.


Commentators have pointed to the apparent conflict between this decision and the Government and HMRC’s ever-hardening stance on avoidance. Accountants and their regulatory bodies have questioned the fairness of apparently extending a high street practitioner’s duty in this way.

In reality, we do not think the judgment throws up any particularly novel propositions. Despite the terms of its retainer letter, Harben offered the Claimant advice on mitigating his tax position. In doing so, they assumed a duty to advise him competently. If they felt they lacked the necessary expertise, they should have made that clear and advised him to seek specialist advice.

The decision does, however, appear to present something of a minefield to practitioners. On the one hand, they may in certain circumstances be duty-bound to consider and advise on tax avoidance schemes, whilst at the same time such schemes are coming under increasing attack by the legislature (indeed, the Bearer Warrant Scheme (BWS) referred to by the court was shut down by HMRC in 2005). In the event of a scheme’s failure, the advising accountant is invariably the tax payer’s first target.

To avoid this minefield, accountants would be well advised to ensure the scope of their duty is clearly set out in their engagement letter, not to volunteer advice that goes beyond the remit of those parameters and to advise the client to seek specialist advice on matters not falling within the scope of their expertise.


Mr Mehjoo, an Iranian refugee who received asylum in the 1980s and subsequently established a multi-million pound fashion business, sought to avoid paying £850,000 capital gains tax on the sale of his share of the company.

Following advice from his accountants, Harben, Mr Mehjoo paid £200,000 to enter an aggressive tax avoidance scheme. After its failure, he issued proceedings against Harben for failing to provide suitable tax advice. In particular, he submitted that, by virtue of his non-domicile status, he was eligible for tax avoidance schemes usually unavailable to British residents and Harben should have advised him of this.

Harben argued that Mr Mehjoo had not expressly requested general advice on tax avoidance, so no such duty to have advised should be imposed.


The High Court held that Harben had been under a duty to advise Mr Mehjoo how to avoid tax liability. In short, it held that Harben:

  • Had erred in failing to recognise Mr Mehjoo was a "non-dom"
  • Should have advised him to enter a BWS, which would have successfully mitigated the tax liability and/or
  • Should have advised him to see a tax specialist who would be better placed to advise on non-domicile issues

The court held that a "reasonably competent" accountant in Harben’s position had "a contractual duty ... to advise the Claimant that non-dom status carried with it potentially significant tax advantages".

Whilst no advice had been expressly sought, and Harben’s engagement letter excluded tax avoidance advice from the scope of its duty, the court found that Harben had assumed such a duty by proffering advice on tax avoidance on numerous occasions.