The U.K. Supreme Court said tax advice given to Prudential Plc by accountants wasn’t protected by legal privilege and should be disclosed to the British government.
The U.K.’s highest court said only advice from lawyers was protected by the privilege, according to a press summary of the judgment today. When tax authorities asked Prudential for information about a tax avoidance scheme created by PricewaterhouseCoopers LLP, the company argued it didn’t have to hand over any documents containing advice from accountants.
“Accountants will be crying into their soup tonight, and tax lawyers will be dancing in the streets,” said Peter Clough, a partner at U.K. law firm Osborne Clarke. “The case presents a clear cut choice for clients: if you want confidential tax advice, you’re better off going to a law firm.”
Companies including Starbucks Corp. and Google Inc. have been criticized by lawmakers for trying to reduce their U.K. tax liabilities with complex accounting methods.
Prudential spokesman Robin Tozer and PwC spokeswoman Laetitia Lynn declined to comment.
The current position on legal privilege is ’’unprincipled and anti-competitive,’’ said Michael Izza, chief executive of the the Institute of Chartered Accountants in England and Wales. Businesses and individuals ’’should be able to seek the best professional advice upon the same terms whether from lawyers, accountants’’ or others, he said in an e-mailed statement.
The ICAEW, which provided evidence in the Prudential case, called on British lawmakers to reconsider the rules.
“The right to see tax advice provided by accountants plays an important role in our work against tax avoidance,” Her Majesty’s Revenue and Customs said in an e-mailed statement. “Today’s decision is a good one for the majority of taxpayers who follow the letter and spirit of the law.”