In support of appeal

The Supreme Court recently concluded(1) that tax advice provided by accountants is not protected by legal advice privilege. Thus ended a long-running battle for the accountancy profession – or did it?


In around 2004 the Prudential group of companies implemented a tax avoidance scheme devised by PricewaterhouseCoopers (PWC). The aim of the scheme was to enable Prudential to deduct tax in Gibraltar and offset it against corporation tax chargeable in the United Kingdom. The inspector of taxes asked to see specified classes of document relating to the scheme; Prudential handed over most of these, but retained those containing tax advice given by PWC, claiming legal advice privilege. It was not disputed that the retained documents contained legal advice regarding tax or that they would have been privileged had the advice been given by a lawyer.


Lord Neuberger(2) began by reiterating that legal advice privilege concerns advice which "relates to the rights, liabilities, obligations or remedies of the client either under private law or under public law".(3) He explained that it exists:

  • to ensure "full and frank communication between attorneys and their client" which "promote[s] broader public interests in the observance of law and administration of justice";(4)
  • solely for the benefit of the client;(5) and
  • as a common law principle developed from as far back as the 16th century.(6)

Neuberger decided that allowing Prudential's appeal would not merely clarify the breadth of legal advice privilege; it would extend it beyond long-understood limits. Furthermore, the specific question before the court – whether tax advice given by accountants was covered by legal advice privilege – was just the tip of the iceberg.(7)

He gave seven reasons why legal advice privilege should be limited to legal advisers (ie, qualified solicitors, barristers, legal executives and foreign lawyers):

  • There were clear judicial statements confining legal advice privilege to communications between a client and its legal adviser.(8)
  • In the past, courts have specifically refused to extend legal advice privilege to legal advice given by a trademark agent, a patent agent and a personnel consultant.(9)
  • The textbooks on privilege supported the limitations.
  • Various significant official reports had proceeded on this basis.(10)
  • In 2003 the government rejected the Office of Fair Trading's proposal to extend privilege to accountants' advice.
  • Parliament, in providing statutory exemptions for patent attorneys, trademark agents and licensed conveyancers, had legislated on the assumption that the privilege applied only to lawyers' advice.
  • Parliamentary deliberations leading to the Finance Act 2008 discussed and rejected such an extension.

He stated that the argument for allowing the appeal was strong in terms of principle, but he nevertheless rejected it, referring to:

  • the close connection between members of the legal profession and the court and the duties that they owe to the court;
  • historical observations regarding the court's involvement in disciplinary procedures of solicitors and barristers; and
  • the view that solicitors and barristers are in a "special position" and are held to higher standards than members of other professions.

He accepted that the limitation was undermined by the extension granted to foreign lawyers without considering their rules, regulations or standards,(11) but said that the common law was not always logical and:

"where a common law rule is valid in the modern world but it has an aspect or limitation which appears to be outmoded it is by no means always right for the courts to modify the aspect or remove the limitation…[it is often] more appropriate to leave the matter to Parliament."

He finished by emphasising that the consequences of allowing the appeal were hard to assess. It was likely to lead to a clear principle becoming unclear, particularly given that the alternative formulation put forward – advice given by a "member of a profession [which] ordinarily includes the giving of legal advice" – would lead to uncertainty and loss of clarity in an already sensitive area.

In support of appeal

Lord Sumption delivered one of two dissenting judgments.(12) He explained that in most of the early cases on the origin of privilege, lawyers were identified "in contradistinction" not to other non-lawyers giving legal advice, but to professionals who gave advice that was not at all law-related, such as priests and doctors. He went on to state:

"Once the distinction became too well understood to require repetition, the references in the cases to the advice of lawyers persisted but simply reflected the assumption that lawyers were the only source of skilled professional legal advice."

He insisted that the test was and should be a functional one – the privilege is conferred in support of a client's right to consult a skilled professional legal adviser, not a member of any particular professional body.

He pointed out that in recent times the courts have expanded the privilege to salaried legal advisers and foreign lawyers in a way that was consistent with the view he expressed.(13) He argued that allowing Prudential's appeal would not extend the common law; it would merely be recognition that "as a matter of fact much legal advice... is given by legal advisers who are not barristers or solicitors but accountants". Furthermore, he emphasised that "[i]t is the function of the courts to ensure that changes in legal, commercial or social practice are properly reflected in the way the law is applied".


The decision is clear: in circumstances where no litigation is on the horizon,(14) documents containing legal advice from accountants, actuaries, engineers, town planners, pension advisers(15) and the like will not be protected from disclosure. The court has invited Parliament to intervene if change is required, but this indicates that any change is likely to be some way off.

For further information on this topic please contact Abigail Silver at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (abigail.silver@rpc.co.uk).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.


(1) R (on the application of Prudential plc) v Special Commissioner of Income Tax [2013] UKSC 1, January 23 2013, supported by the Institute of Chartered Accountants for England and Wales.

(2) Delivering the leading judgment. Other judges who agreed were Lord Walker, Lord Hope, Lord Mance and Lord Reed.

(3) Three Rivers (No 6) 2005 1 AC 610, Para 38 per Lord Scott.

(4) Upjohn Co v United States [1981] 449 US 383, 389, quoted by Scott in Three Rivers at Para 31.

(5) Ventouris v Mountain [1991] 1WLR 607, 611, per Lord Justice Bingham; and Morgan Grenfell & Co Ltd v Special Commissioner of Income Tax [2002] UKHL 21 [2003] 1 AC 563.

(6) Berd v Lovelace [1577] Cary 62 and other cases discussed in R v Derby Magistrates Court ex p B [1996] AC 487, 504-505.

(7) "It is just a subset, no doubt an important subset, of a much larger set."

(8) Slade v Tucker [1880] 14 Ch D 824, 828; Wheeler v Le Marchant [1881] 17 Ch D 675, 681-682; Minter v Priest [1930] AC 558, 581; and Attorney General v Mulholland [1963] 2 QB 477, 489-490.

(9) Dormeuil Trade Mark [1983] RPC 131; Wilden Pump Engineering Co v Fusfeld [1985] FSR 159; and New Victoria Hospital v Ryan [1993] ICR 201.

(10) The 16th Report of the Law Reform Committee (Privilege in Civil Proceedings) 1967 (Cmnd 3472) and the Report of the Committee on Enforcement Powers of the Revenue Departments (CMND 8822) 1983.

(11) Lawrence v Campbell (1859) 4 Drew 485; Macfarlan v Rolt (1872) LR 14 Eq 580; In Re Duncan decd [1968] P 306; and Great Atlantic Insurance Co v Home Insurance Co [1981] 1WLR 529.

(12) Lord Clarke also dissenting.

(13) Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No 2) [1972] 2 QB 102.

(14) Legal advice privilege is one of two heads of legal professional privilege. This judgment has no effect on the scope of litigation privilege.

(15) All of these may belong to professional organisations and be governed by rules and disciplinary codes.