Solicitors who advise clients on the establishment of offshore companies or trusts may soon receive a letter from HMRC asking for information about their beneficial ownership. These letters are likely to be followed by a formal Notice seeking further information about the client and anyone with beneficial ownership in the company or trust under Schedule 23 to the Finance Act 2011.
The Law Society takes the view that disclosure of this information would breach legal professional privilege (LPP). HMRC disagrees, arguing that - as it is asking for information about 'transactions' rather than 'advice' - LPP is not engaged.
Nonetheless, the Law Society's guidance is that LPP is likely to be engaged, because HMRC's request will be related to advice which clients have sought about the establishment of the offshore company or trust. This accords with Lord Carswell's statement in Three Rivers District Council v Governor and Company of the Bank of England (No 6) in 2004, that:
"all communications between a solicitor and his client relating to a transaction in which the solicitor has been instructed for the purpose of obtaining legal advice will be privileged, notwithstanding that they do not contain advice on matters of law or construction, provided that they are directly related to the performance by the solicitor of his professional duty as legal adviser of his client."
Bearing in mind this uncertainty, solicitors receiving a request from HMRC would be well advised to consider whether there is a well-founded claim to LPP before responding. The Law Society would also like to hear from any firm which receives a letter or Notice.
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