Legal Privilege & The New Reporting Regulations
Originally sent: September 24, 2004As you may be aware, when the new reporting regulations were introduced, Inland Revenue believed that solicitors and barristers would have to disclose the details of any tax avoidance scheme discussed with a client, just as would an accountant or financial adviser.
In their earlier guidance notes on the regulations, Inland Revenue stated that even solicitors and barristers would be required to file a report, but would not be required to include within the report any details subject to legal privilege. Section 314 of the Finance Act 2004 underlines the fact that legal privilege still applies and that any information subject to such privilege is not subject to the reporting requirements.
The key point here is to decide exactly which bits of information are subject to legal privilege and which are not. Inland Revenue quite naively thought that they would at least get the basic details of a scheme discussed. The Law Society thinks quite differently.
In its latest guidance to solicitors, the Law Society makes quite clear that under no circumstances should a solicitor disclose anything to Inland Revenue which has been discussed with a client in a meeting subject to professional privilege. This includes the basic details of a tax avoidance scheme, if those basic details were discussed with a client. In fact, simply filing a report with Inland Revenue is implying that the solicitor has had such a meeting with a client ? and even the fact of the meeting itself is subject to legal professional privilege.
Inland Revenue do not like this interpretation. It means solicitors and barristers have effectively been completely excluded from the reporting requirements (unless, of course, the client waives legal privilege ? which is extremely unlikely to happen).
The implication for us as financial advisers is that if we do not already have good professional connections with tax specialist solicitors we should establish them now. And we should strengthen any such connections we may already have.
The implications of the tax avoidance reporting regulations was just one of the topics I included in my recent training day ?Opportunities from the Finance Act 2004?. I also covered numerous sales opportunities which have arisen as a result of the Act and which are not being exploited by the majority of advisers.
The day was so successful that we are now scheduling a repeat for those who were unable to free their diary to attend. The date and venue will be announced shortly. Watch this space!
Adviser Breakthrough Training Solutions Ltd. takes no responsibility for loss occasioned by any person acting or refraining from action, or in consequence of any other person acting or refraining from action, as a result of the material in this article.
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