The Law Society has issued a Guidance Note for solicitors, which
considers the relationship between solicitors' statutory
obligation to disclose tax avoidance schemes to HMRC and legal
professional privilege.
Following a series of high profile tax avoidance scheme
investigations by HMRC, the Finance Act 2004 introduced regulations
requiring promoters of such schemes to disclose arrangements which
enable a person to gain a tax advantage.
Subject to a series of tests, if a solicitor falls within the
Act's definition of a 'promoter', it is possible that
they will be subject to the disclosure obligations. This has
caused concern for some solicitors, who are uncomfortable about a
potential conflict arising between their statutory obligations and
legal professional privilege. The newly-issued Guidance Note
clarifies the position by investigating the main issues which a
solicitor faced with this situation must consider:
(a) whether they fall within the definition of a
'promoter';
(b) the particular circumstances of the matter; and
(c) whether legal professional privilege applies.
In relation to the last of these, the Guidance Note recommends that
solicitors should ask themselves the following:
"whether any information that you would be required to
disclose to HMRC under the (disclosure of tax avoidance schemes)
regime forms part of, or would otherwise reveal, the substance or
subject matter of confidential communications that have passed
between you and your clients for the purpose of obtaining and
giving legal advice. If the answer to that question is yes
then the information will usually be subject to the privilege
exception."
If the privilege exception does apply, such information should not
be disclosed unless the solicitor is aware that their client has
waived the privilege.
Detailed guidance and worked examples are provided in relation to
each of the tests to be satisfied if a tax avoidance scheme is to
be disclosed, making the Guidance Note essential reading for any
solicitor who has dealings in this area of law, and extremely
useful for other professionals working in this field, such as
accountants and financial advisors. To view the Guidance Note
click here.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 07/06/2011.