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The Prudential decision – implications for taxpayers

08 February 2013. Published by Adam Craggs, Partner

The Supreme Court has refused to extend legal advice privilege ('LAP') to legal advice given by professionals who are not lawyers.

In Prudential Plc & Anor v Special Commissioner of Income and Tax & Anor [2013] UKSC1, the appellants argued that they were not obliged to disclose documents to HMRC in connection with a purported tax avoidance scheme, if those documents evidenced legal advice from accountants on tax law. The Supreme Court (in a majority of 5-2) held that LAP is restricted to communications with a 'qualified lawyer' and should not be extended to communications in connection with advice given by professionals other than lawyers.


PricewaterhouseCoopers ('PWC') gave tax advice to the Prudential group in relation to a series of transactions undertaken by the group. HMRC opened an enquiry into the transactions and issued information notices under the former section 20B(1) of the Taxes Management Act 1970[1] for the disclosure of a series of documents relating to the transactions. Prudential complied with most of these requests but refused to produce documents that related to the seeking (by Prudential) and the giving (by PwC) of legal advice in connection with the transactions. Prudential maintained that these were excluded from the disclosure requirements contained in section 20 by virtue of LAP, in accordance with the House of Lords' decision in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] UKHL 21.

This raised the very important question of whether LAP extends to legal advice given by someone other than a member of the legal profession. Both the High Court and the Court of Appeal had dismissed the appellants' arguments.

The Supreme Court's Judgment

The majority in the Supreme Court dismissed the appellants' appeal and confirmed that LAP does not extend to professional advisers other than lawyers. The Court provided the following reasons for its decision:

  • To extend LAP in the manner sought by Prudential would extend LAP beyond what is currently, and has for a long time been, understood to be its limits.
  • It is universally understood that LAP only applies to communications in connection with advice given by members of the legal profession, and there are clear judicial statements of high authority to that effect. The current editions of textbooks on privilege and evidence, as well as more than one significant official report, have proceeded on this basis.
  • Extending LAP to any case where legal advice is given by a person who is a member of a profession which ordinarily includes the giving of legal advice would be likely to lead to a clear and well understood principle becoming uncertain; because it is unclear which occupations would be members of a profession for this purpose. There would be room for uncertainty, expenditure, and inconsistency, if the court had to decide whether a group constitutes a profession for the purposes of LAP. It is also unclear how a court would decide whether a profession is one which ordinarily includes the giving of legal advice.
  • Where members of other professions give legal advice, it will often not represent the totality of the advice, so it may also be difficult to decide how to deal with documents which contain legal and non-legal advice.
  • The extension of LAP to cases where legal advice is given from professional advisers who are not qualified lawyers raises questions of policy which should be left to Parliament. Accordingly, the consequences of extending LAP would be best considered through the legislative process, with its wide powers of inquiry and consultation. The extension of LAP to professions other than lawyers may only be appropriate on a conditional or limited basis, which cannot appropriately be assessed, let alone imposed, by the courts.
  • Parliament has on a number of occasions legislated in this field on the assumption that LAP only applies to advice given by lawyers. Therefore it would be inappropriate for the Court to extend LAP to non-lawyers.


The Supreme Court has confirmed that LAP is not available in relation to legal advice emanating from professional advisers other than lawyers. As a sound understanding of LAP can provide a strategic advantage allowing a client and his lawyer to refuse to disclose privileged documents and/or communications and/or to provide information relating to their subject matter, taxpayers will wish to consider very carefully whether it would be advantageous to be able to invoke LAP should HMRC seek to invoke their information powers in order to obtain documentation and information.

[1] Similar provisions are now contained in Schedule 36, Finance Act 2008.