Prudential Plc & Anor, R (on the application of) v Special Commissioner of Income Tax & Anor

Legal advice privilege applies to confidential legal advice given by members of the legal profession. It does not extend to advice on tax law given by accountants merely because accountants possess equivalent expertise or commonly advise on tax. Litigation privilege may extend to communications involving non-lawyer representatives where they concern the preparation or conduct of litigation, but that does not enlarge legal advice privilege in non-litigation matters. A challenge to an information notice under section 20 of the Taxes Management Act 1970 succeeds only if the officer’s opinion that documents contain or may contain relevant information was irrational or unavailable to a reasonable officer. Relevance is not confined to factual material and does not require information to be necessary to determine the tax liability.

Prudential sought judicial review of notices served under sections 20(1) and 20(3) of the Taxes Management Act 1970 in connection with a marketed tax avoidance scheme. The notices sought documents from the taxpayer and a related third party.

Prudential argued that the documents were protected by legal professional privilege because they contained tax-law advice given by accountants, and alternatively that the documents were irrelevant to the taxpayer’s liability. The central issues were whether legal advice privilege extends beyond advice given by lawyers and whether the Inspector and Special Commissioner had acted unlawfully in treating the documents as potentially relevant.

1. The claim was dismissed. Neither the legal professional privilege challenge nor the relevance challenge was established.
2. Legal professional privilege is a fundamental common-law right of the client. Legal advice privilege and litigation privilege are parts of a single privilege, but they need not have identical scope. The existing authorities establish that legal advice privilege applies to communications with members of the legal profession. The court was bound by that understanding of the law and could not extend the privilege to accountants by analogy.
3. The modern role and expertise of accountants in advising on tax law provided a powerful policy argument for equal treatment. It did not, however, justify the court in creating a new privilege. Parliament had made specific provision for equivalent protection in some contexts, which supported the conclusion that no general common-law privilege existed for advice given by non-lawyers.
4. The decision in Wilden Pump Engineering Co v Fusfeld [1985] FSR 159 provided binding reasoning that the common-law privilege was confined to legal advisers and should not be extended generally to other professionals. The position was different where litigation privilege applied. The court assumed that a client represented by an accountant in tax litigation could claim litigation privilege, but that assumption did not assist Prudential in relation to non-litigation tax advice.
5. For the relevance challenge, the statutory question was whether the officer reasonably considered that the documents contained or might contain information relevant to the taxpayer’s liability or its amount. “May be relevant” was not limited to factual material, and the information need not be necessary to form a view on liability. Judicial review was concerned with whether the opinion was reasonably available, not whether it was correct.
6. The documents could contain information about the true nature of the transactions and what had or had not been pre-ordained. The Inspector and Special Commissioner were therefore entitled to regard them as potentially relevant. The notices did not unlawfully require disclosure of material protected by legal professional privilege, since the Revenue accepted that properly privileged material need not be disclosed.

First-instance judicial review proceedings. The judgment does not state any prior appellate decision in this litigation.