In a recent case, R (on the application of Prudential plc & Anor) v Special Commissioner of Income Tax & Anor (2010), the Court of Appeal held that Legal Professional Privilege (“LPP”) does not extend to accountants, and only applies to advice given by lawyers. This case highlights the need for awareness of the limitations of LPP when choosing a tax specialist, and, if disputes occur, clarity around what is and isn’t privileged.


The case arose as the result of an investigation by HM Revenue & Customs (HMRC) into a commercially marketed tax avoidance scheme operated by Prudential Plc (“Prudential”). HMRC served Notices on Prudential, seeking disclosure of a variety of documents, which included a large number of documents on which advice had been sought by Prudential from both domestic and foreign lawyers and accountants.

The Notices were served under s.20 of the Taxes Management Act 1970 (which has since been repealed). In R (Morgan Grenfell & Co) v Special Commissioner of Income Tax (2002), the House of Lords ruled that as a matter of general principle LPP existed in relation to the disclosure of documents pursuant to s.20 Notices. Tax payers and third parties were therefore not required to disclose documents containing legal advice.

Prudential sought to prove that the documents on which advice from accountants was obtained also fell under LPP, thereby allowing them to refuse disclosure.

They submitted that on a number of occasions, advice on tax law will be best provided by accountants and not lawyers. The principles of LPP that protect the content of advice between a client and legal adviser should therefore also extend to accountants.


The High Court dismissed the application, and Prudential appealed on the grounds that the key issue in determining whether LPP applied to accountants was not the status of the adviser, but the nature of the advice sought. They argued that one should look at the nature of the advice, and whether it was being provided by a qualified individual. If so, it should be covered by LPP.

The appeal was dismissed by the Court of Appeal on three grounds:

First, the court said that while LPP had been extended to professionals other than lawyers (namely patent and trademark agents and licensed conveyancers), the extension had been specific to highly regulated professions and also to advice that was directly related to those professions. These three extensions had been part of numerous governmental committee decisions, during which the issue of accountants and LPP was also considered in depth. The court therefore concluded that it was clearly the intention of the government to exclude advice from accountants from within the scope of LPP.

The second reason that the appeal was dismissed was that the court felt bound by the decision in Wilden Pump Engineering Co v Fusfeld (1985), in which LPP was limited to advice by members of the legal professions of England and Wales, and could not be extended to someone who was not a lawyer. This was despite the fact that the advice that they had been asked to give was legal in nature.

Finally, Prudential also sought to gain coverage via Article 8 of the European Convention on Human Rights (the right to respect for private and family life). The court quickly rejected this argument on the basis that any extension of cover for accountants would make the scope of the Article far too uncertain.  

What does this mean for you?

By rejecting the reasoning put forward by Prudential, the Court of Appeal has sent a clear message that LPP applies solely to members of the legal profession (plus patent and trademark agents and licensed conveyancers). Further, if the scope of the privilege is to be extended, it will have to be via Parliament and not the courts. The Institute of Chartered Accountants of England and Wales voiced their disappointment at the court of appeal decision stating “We feel that the current situation is unsustainable and contrary to public interest”. Further reviews will undoubtedly follow, as they seek to level the playing field for companies and individuals seeking tax advice.