Guidance for solicitors advising on tax

This practical guidance for solicitors aims to assist you and help you make decisions when advising on tax. It summarises and explains how the high standards that you must uphold link to everyday professional practice.

Solicitors advise a wide range of clients on tax matters, including:

  • individuals
  • small businesses
  • charities
  • local authorities
  • major companies, including UK companies and foreign companies seeking to invest in the UK

Solicitors make an important contribution to the UK economy, representing clients on tax matters in all sectors, including agriculture, financial services, consumer goods, energy, engineering, construction and life sciences.

Tax advice often forms only a part of the advice provided by solicitors.

This guidance focuses on advice provided by solicitors in respect of tax, whatever the nature of the transaction or the context in which it occurs, including where the main focus of the advice is on a different aspect of law.

It considers how a number of sets of rules and obligations that apply to solicitors apply to the giving of that advice.

We promote high standards and aspirations for solicitors.

This guidance aims to support excellence in the profession for the public good by explaining and summarising, rather than extending, key aspects of the frameworks that apply to solicitors when they provide tax advice.

These frameworks include the contractual, tortious, fiduciary, statutory and regulatory rules that solicitors must respect and uphold when advising on tax.

They are backed up by an independent regulator (the Solicitors Regulation Authority, SRA) and an independent tribunal (the Solicitors Disciplinary Tribunal, SDT).

The frameworks promote the provision of high-quality legal advice from solicitors on taxation that upholds and promotes the rule of law and the integrity of the tax system.

Solicitors providing advice in respect of tax should therefore be aware of their roles and duties in law and regulation as they support people to navigate the application of tax law and practice in a complex environment.

This guide covers:

Key themes

While not a replacement for understanding the detailed rules and obligations discussed in this guidance, some of the key themes are:

1. Understand and agree the scope of your retainer

It is important that you and your client understand what is and is not within the scope of your advice.

If you do not wish to advise generally on tax matters, you can agree a limited retainer, or agree to exclude tax matters from your advice.

2. Duty of care

Where your retainer includes tax matters, you are under a duty to exercise reasonable care and skill in providing tax advice.

3. Duties to advise within the scope of the retainer

You should address all relevant tax matters within the scope of the retainer that arise in relation to the transaction.

This may include informing the client of ways to achieve their objectives in a way that does not give rise to particular tax costs.

4. Duty to warn of risks

Where your retainer includes tax, you should consider whether, in all the circumstances, you should warn your client of risks relating to the matter you are advising on.

The warning of risks may be particularly important if the relevant tax rules are uncertain or unclear, or if there is an increased risk of HM Revenue and Customs (HMRC) challenge or of reputational risk to the client.

5. Regulatory duties

As well as the general legal requirements imposed on solicitors in the course of provision of legal services, you are subject to the rules and high ethical standards set by the SRA, including the seven SRA principles discussed further below.

These duties include:

  • duty to uphold the rule of law – you are obliged to uphold the rule of law and the proper administration of justice. The courts have pointed out that the rule of law depends on the access of citizens to independent legal advice in respect of their rights and obligations – and that this is particularly significant in the area of tax law
  • duty to uphold service and competence levels – you are obliged, both as a matter of law and under SRA rules, to provide a proper standard of service to your clients. This interacts with your duty of care (see (2) above) and the importance of agreeing an appropriate retainer for your advice (see (1) above). You may be entitled to rely on appropriate advice of a barrister but there are limitations to this
  • further duties – there are other duties that may in some circumstances be relevant to tax advice, including:
    • you owe a duty of trust and confidence to your client
    • you may not obtain an advantage from transactions forming part of your retainer without full disclosure and client consent
    • you should act in the best interests of each client
    • you should keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents and you must act to maintain the client’s legal professional privilege unless it is waived by the client
    • you should uphold public trust and confidence in the solicitors' profession, including by seeking not to act unfairly in relation to a third party
    • you must comply with the ethical standards of the solicitors' profession, and advise in respect of tax matters in an honest, accurate and even-handed manner

6. Tax evasion

You must not facilitate, or undertake or be knowingly concerned in, tax evasion. This is a criminal offence.

A solicitor's firm is also under an obligation to have reasonable procedures in place to prevent its employees and other associated persons from criminally facilitating tax evasion by another (including by its client).

Guidance on conduct provided by other representative bodies and/or HMRC

The duties and obligations and regulatory framework to which solicitors are subject should be distinguished from the provisions of Professional Conduct in Relation to Taxation (PCRT) to which a number of professional advisory bodies are signatories.

The PCRT sets out principles and standards which these bodies’ members are expected to follow in giving tax advice.

We have not adopted the PCRT because the obligations of the solicitors’ profession as a whole in this area are already set out by the law and the relevant regulatory rules governing solicitors.

These rules have been formulated over centuries, and they comprehensively describe the relationship between solicitors and their clients.

They draw the right balance for the solicitors’ profession as a whole between protecting the interests of the client, the interests of the public and the rule of law, ensure that access to legal advice is preserved, and are backed up by an independent regulator.

However, solicitors advising on tax are recommended to be familiar with the content of the PCRT, which overlaps with many of the existing professional obligations on solicitors.

For example, the five core principles of the PCRT (integrity; objectivity; professional competence and due care; confidentiality; and professional behaviour) are consistent with the legal and regulatory framework that applies to solicitors as described below.

The PCRT expressly provides that it is not to be interpreted so as to be in conflict with any professional duties of solicitors.

Solicitors subject to the PCRT because they are members of one of the signatory professional bodies should therefore comply with the obligations and duties required by the SRA and covered in this guidance in priority over the PCRT.

HMRC produces standards from time to time which set out its expectations of tax advisers.

For example, HMRC publishes a Standard for Agents which sets out its expectations of individuals and businesses that professionally represent or advise taxpayers.

Where relevant, solicitors may wish to consider the contents of this or any other HMRC standards, but those standards do not form part of a solicitor’s professional obligations.

Scope of the retainer

If a client wishes to engage a solicitor who is willing to offer legal services then a retainer arises when that solicitor is instructed.

This retainer will be governed by the terms upon which the solicitor agrees to act and by the duties imposed by law and regulation upon the solicitor.

A solicitor and client may, by agreement, limit the terms of the retainer which may in turn limit the solicitor’s duties.

As a matter of good practice, the solicitor should confirm any such agreement in writing.

If they do not do so, a court may not accept that any such restriction was agreed. (See Sharon Minkin v Lesley Landsberg (Practising as Barnet Family Law) [2015] EWCA Civ 1152, para 38.)

A solicitor who does not have the relevant specialist knowledge of tax should not advise on tax matters, and it would be advisable to exclude tax specifically from the retainer in those circumstances.

Solicitors who have specialist knowledge of certain tax areas, such as stamp duty land tax or inheritance tax, should make it clear in their retainer the limits to the areas on which they will advise.

However in all cases, solicitors do have a duty to ensure their clients are in a position to make informed decisions about the advice they may need and the options available.

The informed consent of the client should be obtained to any such limitations where there are or could be material tax issues beyond the competence of the relevant solicitor.

Even where a solicitor is willing to advise on tax, they may wish to include a provision in their client care letter reserving the right to instruct specialist tax counsel or to refer the client to tax advisers (along with the right to charge the client the fees incurred in doing so).

Duty to exercise reasonable care and skill

A retainer is a contract which will have both express and implied terms, which give rise to duties.

One of the implied, if not express, duties on a solicitor under a retainer is the duty to exercise reasonable care and skill.

Solicitors also owe a duty of care in tort to their clients “to do that which a reasonably competent practitioner would do having regard to the standards normally adopted in his profession”. (per Oliver J in Midland Bank Trust Co Ltd v Hett Stubbs and Kemp [1979] Ch 384 at 403.)

This means solicitors providing tax advice are under legal duties to maintain standards.

These legal duties (under both contract and tort) are complemented by similar regulatory duties which are described under regulatory duties below.

Duty to advise within the scope of the retainer

To the extent that tax is not clearly excluded from the solicitor’s retainer, a solicitor may be considered negligent if their advice does not address relevant tax matters that arise in relation to the transaction (see Mason v Mills and Reeve [2012] EWCA 498).

It is implicit in the solicitor’s retainer that the solicitor will proffer advice which is reasonably incidental to the work being carried out.

In determining what advice is reasonably incidental, it is necessary to have regard to all the circumstances of the case, including the character and experience of the client (Minkin v Landsberg [2015] WL 6966258 at [38]).

If a solicitor knows or ought to know about a way to achieve their client's tax objectives in a way that does not incur particular tax costs, they may be under a duty to advise the client about that. This may include, but is not limited to, claiming any available reliefs or exemptions.

For example, a conveyancing solicitor who was instructed to advise in relation to the purchase of a lease and the subsequent grant of a sub-lease by the purchaser was found to be negligent in failing to point out that this transaction exposed the client to a tax charge that would not have been incurred had the transaction been structured in a different way (Hurlingham Estates v Wilde and Partners [1997] 1 Lloyd’s Rep 525).

Lightman J in the Hurlingham Estates case found that the solicitor should reasonably have appreciated that the client needed his advice and guidance about the tax liabilities arising from the transaction.

The courts have consistently found that professionals advising on tax are under an obligation to point out the "hidden" tax consequences of what the client proposes to do. This might involve informing the client about an alternative way of structuring a transaction to achieve the same economic result.

However, that obligation does not necessarily extend to more sophisticated tax planning (for example involving reformulation of the transaction in order to bring about particular tax consequences) as opposed to a mitigation of the tax liability which the transaction will otherwise produce.

This is particularly the case where solicitors have no reason to know that such planning opportunities are available.

However, solicitors should consider their obligations, and whether to recommend that their client seeks specialist tax advice, on a case-by-case basis. (See generally Hossein Mehjoo v Harben Barker and Harben Barker Ltd [2014] EWCA Civ 358.)

Ultimately, this is a point that requires the solicitor to exercise careful judgement.

In giving any such specialist tax planning advice the solicitor should always consider all of their duties to their client and in the public interest, including the related need to warn appropriately of risk, discussed below.

Duty to warn of risks

Advising on tax often requires solicitors to make judgements on complex issues and uncertain outcomes.

Even apparently straightforward situations can have complex, or uncertain, tax consequences.

Tax legislation changes regularly and can be difficult to interpret. Legislation may be introduced with a particular situation in mind, and may not cater adequately for other situations.

Equally, it may be drafted very broadly and apply to situations outside the stated policy intention of the legislation.

HMRC publishes guidance on many aspects of the tax legislation.

However, HMRC's guidance is just its interpretation of the meaning of the law, and does not bind either HMRC or the courts.

There are many instances where published guidance has had to be changed following a court decision.

Furthermore, it is rarely possible for taxpayers to rely on HMRC guidance if there is a subsequent dispute with HMRC (see the Queen (on the application of Aozora GMAX Investment) v HMRC [2019] EWCA Civil 1643).

In this context, advice that is ultimately not upheld by the courts is not necessarily negligent or improperly given.

However, solicitors do need to communicate risks to clients clearly, for example that the view they have taken as to the law may not be upheld, or that HMRC may take a different view.

Failure to give a specific warning that the solicitor’s view may not be upheld may in itself constitute negligence if a reasonably competent practitioner in the relevant field with the expertise claimed by the solicitor would have given such a warning (Barker v Baxendale Walker [2017] EWCA Civ 2056; see also Herrmann v Withers LLP [2012] EWHC 1492 (Ch)).

Solicitors should consider the full range of legal interpretative rules and relevant case decisions in assessing risks and in determining which risks they need to bring to the client’s attention.

The solicitor should also be aware of, and consider highlighting to the client, applicable legislation and principles of interpretation applied by the courts that might operate to counter the result that the client is seeking.

For example, it may not be sufficient that a hoped-for tax result is justified on a literal reading of the words of a particular relevant statutory provision if a purposive reading of the legislation would suggest otherwise. See the appendix: aspects of the tax environment to consider.

Generally, when advising on tax, solicitors should consider and address all the risks that are appropriate in the circumstances. These may include:

  • the risk that HMRC may challenge the analysis (which will depend on a number of factors but may generally be lower for a straightforward commercial transaction with limited or no tax benefit)
  • any potential non-tax risks, including that the arrangements may alter the legal position of the parties (potentially in a detrimental way and regardless of whether the tax effects are as they were intended to be)
  • reputational risks for the client (for example if what the client would like to do is likely to be perceived by HMRC as contrived or abusive, or as potentially giving rise to some sort of tax advantage that is not justified by the legislation)
  • the possibility of interest and penalties, including enhanced penalties where applicable under the general anti-abuse rule (GAAR) or other rules, as well as the potential costs of any appeals or disagreements with HMRC

The character and experience of the client are among the relevant circumstances to be considered in determining the extent of a solicitor’s duty to offer advice or information or warnings that are reasonably incidental to the work being carried out:

“an experienced businessman will not wish to pay for being told that which he/she already knows. An impoverished client will not wish to pay for advice which he/she cannot afford. An inexperienced client will expect to be warned of risks which are (or should be) apparent to the solicitor but not to the client.” (Minkin v Landsberg [2015] WL 6966258 at [38])

Duty of loyalty to the client

A solicitor owes fiduciary duties to a client.

The relationship between solicitor and client is one of trust and confidence. This has been described as “one of the most important fiduciary relationships known to our law” (per Cozens-Hardy MR in Re Van Laun [1907] 2 KB 23 at 29).

It means that a solicitor owes an obligation of loyalty to a client.

It follows that solicitors must not take any secret advantage whether or not any dishonesty is involved (Boardman v Phipps [1967] 2 AC 46).

Solicitors should make full disclosure of any interest in a transaction for which they are retained and consider whether they can continue to act in such circumstances (Spector v Ageda [1973] Ch 30).

For example, it would not be appropriate for a solicitor to profit from tax arrangements in which their clients are involved without the informed consent of the clients.

A solicitor should also consider whether such arrangements are compatible with their regulatory duties (see regulatory duties below).

For example, when advising on a conveyancing transaction, a solicitor acting for a buyer should consider whether their client’s lenders should be informed.

Solicitors must act in good faith, informing and consulting with the people they advise, and obtaining any necessary authority to act.

Regulatory duties

All solicitors must follow the rules and meet the high ethical standards set by the SRA, the profession’s independent regulator.

These rules, known as the SRA Standards and Regulations, exist for the benefit of the clients whom solicitors serve and in the public interest, and were updated with effect from 25 November 2019.

The SRA Standards and Regulations are supported by SRA guidance which indicates how the SRA may apply them and which is there to help solicitors in the judgments they make and comply with SRA regulations.

Solicitors should be aware that the SRA has issued a warning notice on tax avoidance which should put them on alert as to the importance of regulatory compliance in a tax context.

Solicitors and law firms have a duty to co-operate openly and promptly with the SRA.

If they fail to do so, the SRA can require solicitors and firms to deliver documents or information, or to provide an explanation in person.

The SRA has further legal powers to take enforcement actions, including imposing sanctions such as fines.

It can also refer a case to the Solicitors Disciplinary Tribunal (SDT) to adjudicate on alleged breaches of the rules and regulations.

The SDT, which is constituted as a statutory tribunal under section 46 of the Solicitors Act 1974, is independent of both the Law Society and the SRA, and has powers to prohibit a solicitor from practising or to impose substantial fines.

The seven SRA Principles set out below are the fundamental tenets of ethical behaviour expected of solicitors.

“You act:

  • in a way that upholds the constitutional principle of the rule of law, and the proper administration of justice
  • in a way that upholds public trust and confidence in the solicitors' profession and in legal services provided by authorised persons
  • with independence
  • with honesty
  • with integrity
  • in a way that encourages equality, diversity and inclusion
  • in the best interests of each client”

These Principles are supplemented by the SRA Code of Conduct for Solicitors, RELs and RFLs (SCCS) and the Code of Conduct for Firms (SCCF) (the codes), also introduced with effect from 25 November 2019.

Point 1 of the SCCS requires solicitors to maintain trust and act fairly. This includes: “You do not abuse your position by taking unfair advantage of clients or others.” There is an equivalent provision for firms at point 1 of the SCCF.

Point 3 of the SCCS requires solicitors to uphold service and competence levels. Again, there is a similar requirement for firms at point 4 of the SCCF.

The regulatory duties above are also briefly discussed further below.

1. Duty to uphold the rule of law

As noted above, the first SRA Regulatory Principle requires solicitors to uphold the constitutional principle of the rule of law and the proper administration of justice.

In the tax context, the rule of law is reflected in the principle that no one is to be subject to taxation except as a result of legislation enacted for the purpose by Parliament. That legislation is interpreted by the courts.

Tax is collected by HMRC, but HMRC is not the arbiter of whether or not tax is due.

While the courts will give due weight to HMRC's views, ultimately they will interpret the laws as laid down by Parliament.

Equally, the making of filings and payment of tax imposed by such laws is a legal duty, and failure to make such filings and pay taxes lawfully due may attract penalties, interest, and, in some cases, prosecution.

The rule of law therefore “depends on the citizen being able without inhibition to find out what his legal position is. The complexity of the modern law and its progressive invasion of the interstices of daily life, have made this a public interest of greater importance than ever before. It is perhaps particularly significant in the area of tax law, where the citizen is brought up against the power of the state and the law is often technically complex.” (R. (on the application of Prudential plc and another) v Special Commissioner of Income Tax and another [2013] STC 376 at 405, per Lord Sumption).

The ability of citizens (and indeed the state) to have unfettered access to advice about their legal position is therefore a key pillar of the rule of law.

Solicitors uphold the rule of law by advising on tax matters to ensure that the law is understood and realised in practice.

Accessibility of legal advice is critical to the operation of the tax system in accordance with democratic principles.

Solicitors who advise on tax therefore play a vital role in upholding both the rule of law and the integrity of the tax system.

Further, a key principle on which our liberal democracy depends is that every person is entitled to legal representation, no matter who they are (or, in the case of criminal defendants, what they are charged with).

This is reflected for barristers in the cab-rank rule under which a barrister is (with limited exceptions) generally required to accept instructions within their area of professional expertise regardless of the nature of the client or of the client's questions.

While this rule does not apply to solicitors (for good reasons, given the closer relationship that solicitors need to develop with their clients), many solicitors appropriately take the view that in order to uphold the rule of law, they will advise clients on matters within their competence (subject to all the other safeguards and principles summarised in this guidance), regardless of whether or not they (or others) agree with a particular tax or other outcome that the client is seeking to achieve.

2. Duty to maintain trust and act fairly

Solicitors are under a duty to act in a way that upholds public trust and confidence in the solicitors' profession and in legal services provided by authorised persons.

They are also required by the codes not to abuse their position by taking unfair advantage of clients or others.

A solicitor who consciously takes unfair advantage of a third party would very likely breach this duty (see SRA v Anderson Solicitors and others [2013] EWHC 4021 (Admin) at [67]).

Applying this to advising on tax, a specific example of an area in which solicitors may need to take special care is if asked by a client to provide a generic opinion which the client will then provide to third parties.

A solicitor should consider whether any such opinion adequately articulates the risks involved.

What constitutes acting fairly in relation to a third party who is provided with such an opinion will depend on all the circumstances, including the nature of the third party by comparison with the client.

For example, where the client is in the business of marketing tax arrangements to individuals, a solicitor should consider carefully whether it is appropriate to issue an opinion in relation to a specific tax product with a view to that being provided to the client's potential customers where the solicitor has no relationship with those customers and knows nothing about their circumstances.

If the solicitor believes that something they are asked to do in the course of a retainer involves the solicitor taking unfair advantage of third parties, it may be necessary for the solicitor to consider ceasing to act for the client by terminating their retainer, assuming this can be done taking account of the terms of the retainer and the codes.

The solicitor should provide reasonable notice of any decision to cease acting and explain the reason for that decision.

The client should also be advised of any proper alternative options for obtaining legal advice and assistance to pursue their matter.

Finally, although this is unlikely given HMRC’s resources and specialist knowledge, there might be circumstances where a solicitor is found to have taken unfair advantage of HMRC – for example if the solicitor intentionally made misleading statements to HMRC in the context of representing a client in a tax dispute.

3. Duty to act with integrity

Solicitors should always be careful to act with integrity in giving tax advice. The concept of integrity is wider than that of honesty.

“Integrity connotes adherence to the ethical standards of one’s own profession… Such a professional person is expected to be even more scrupulous about accuracy than a member of the public in daily discourse” (per Jackson LJ, Wingate v The Solicitors Regulation Authority [2018] EWCA Civ 366).

SRA guidance indicates cases where it is likely to take disciplinary action for lack of integrity, in certain circumstances including “where there has been a wilful or reckless disregard of standards, rules, legal requirements and obligations or ethics, including an indifference to what the applicable provisions are or to the impacts or consequences of a breach.”

In a tax context, solicitors should act with integrity in the way they advise clients, such that they do not subordinate the interests of their clients to their own financial interests or allow personal interests to override the need to give appropriate and specific disclosures of context and warnings of risks (SRA v Chan [2015] EWHC 2659 (Admin)).

However, advising a client in relation to an arrangement that involves tax planning is not in itself a breach of this duty.

4. Duty to act in the best interests of the client

If a solicitor is approached to document or implement an arrangement designed by others, they should be careful to ensure it is in the best interests of the client.

This may require them to carry out reasonable due diligence into the arrangements and the providers of the arrangements (para 32.56, SRA v Mounteney, SDT Case No. 12023-2019).

The solicitor may also need to consider whether the role their client plays in the arrangements exposes them to commercial and legal risks and advise appropriately.

5. Duty of confidentiality and maintenance of clients’ privilege

You should keep the affairs of current and former clients confidential unless disclosure is required or permitted by law or the client consents.

SRA guidance on this requirement states that:

“Disclosure of information is only allowed where the client consents to it or it is permitted by law. Before approaching a client for consent, you should consider whether disclosure is necessary to proceed with a specific matter.”

Solicitors should also consider the effect of legal professional privilege (LPP), including on whether disclosure to HMRC or other parties is permitted by law.

LPP is treated under English law as a fundamental common law right and a human right.

It provides additional protections from disclosure in relation to certain confidential communications, and material evidencing such communications, that take place between clients and/or their lawyers and in some circumstances also between clients/lawyers and third parties.

Read more in our practice note on legal professional privilege.

A solicitor who discloses confidential material relating to a client’s affairs or waives privilege without the informed consent of their client would be in breach of their professional duties (see the SRA Standards and Regulations including paragraphs 6.3 and 6.4 of both the Code of Conduct for Solicitors and the Code of Conduct for Firms).

Duty to uphold service and competence levels

Both the law and the SRA Codes (see Regulatory duties above) provide that solicitors must ensure that they provide a proper standard of service to their clients.

Solicitors should also refer to the SRA’s statement of solicitor competence which defines the continuing competences that the SRA requires from all solicitors.

The statement of solicitor competence takes a broad definition of competence as being the ability to perform the roles and tasks required by one’s job to the expected standard.

It specifies a range of competencies around ethics, professionalism, judgement, technical legal practice, working with other people, and managing themselves and their work.

This means, among other points, that solicitors should be able to:

  • understand and apply the ethical concepts which govern their roles and behaviour as a lawyer
  • maintain the level of competence and legal knowledge needed to practise effectively, taking into account changes in their role and/or practice context and developments in the law
  • work within the limits of their competence and the supervision which they need, including disclosing when work is beyond their personal capacity and knowing when to seek expert advice
  • apply understanding, critical thinking and analysis to solve problems
  • develop and advise on relevant options, strategies and solutions, including identifying the consequences of different options
  • establish and maintain effective and professional relations with clients, including providing information in a way clients can understand (taking into account their personal circumstances)
  • inform clients in a timely way of key facts and issues, including risks

These obligations apply equally to tax matters where advising on tax is within the retainer.

The general tax environment

Among other things, solicitors’ duty to uphold service and competence levels (allied with the other solicitors’ duties described above) will require them to consider, and advise their clients, how the following aspects apply to the particular facts and circumstances:

  • the content of tax law
  • the status of HMRC guidance
  • the approach of the courts in interpreting tax legislation
  • the GAAR
  • the disclosure rules
  • the requirements for tax return declarations

In addition, solicitors will need to understand the Enablers rules, and where applicable consider how they apply. These potentially impose penalties on a solicitor who advises in relation to an arrangement that is subsequently found to contravene the GAAR.

These aspects of the tax environment are summarised in the appendix to this guidance.

Reliance on counsel's advice

The duty to uphold service and competence levels arises where a solicitor instructs a barrister to provide an opinion on an issue.

Although obtaining an opinion from counsel can be valuable in providing a proper standard of service to a client, solicitors should note that simply relying on counsel’s opinion is not, by itself, sufficient to discharge their own duties.

Solicitors are generally entitled to rely on the advice of counsel properly instructed, but are not entitled to follow such advice blindly and are in the ordinary way obliged to apply their own expert professional minds to the substance of the advice received (Davy-Chiesman v Davy-Chiesman [1984] Fam 48).

However, where a solicitor is inexperienced or lacks the necessary expertise, it may be appropriate for them to rely on counsel. See Swedac Ltd v Magnet Southern PLC [1990] FSR 89 and R v Luton Family Proceedings Court Justices ex parte R (1998) 4 CL 51.

In some circumstances, it may be necessary to withdraw instructions where the barrister’s competence or reliability is in doubt (re A (a minor) [1988] Fam Law 339).

Solicitors should also consider carefully whether any counsel’s opinion has been given on the basis of all the relevant facts.

For example, it is not uncommon for those marketing tax arrangements to provide potential users of those arrangements with an opinion from counsel that purports to cover those arrangements.

Typically, however such opinions are given on the basis of a generic type of arrangement with a limited fact pattern.

A solicitor who is subsequently asked by a client to assist with the implementation of an arrangement of that type should be aware that counsel’s opinion might not necessarily apply to the facts of the client’s case.

This may be a material issue in terms of the reliance that can be placed on the counsel’s opinion because the precise way an arrangement is implemented can affect its tax treatment.

Solicitors and the prevention of tax evasion

Solicitors must not facilitate tax evasion by a client.

The law draws a clear distinction between tax evasion, which is a criminal offence involving dishonesty, and tax avoidance which is not.

It is a criminal offence to undertake tax evasion, or to be knowingly concerned in tax evasion by another.

A person can be knowingly concerned in tax evasion by providing any practical assistance with the necessary knowledge, and need not be directly involved in the provision of tax advice.

In addition, the Criminal Finances Act 2017 introduced a new strict liability corporate criminal offence which may apply to solicitors’ firms if they fail to take reasonable steps to prevent the criminal facilitation by their employees or other persons acting for them or providing services to them of tax evasion by a third party.

Accordingly, if a member of a solicitors’ firm’s staff commits a criminal offence (with the necessary mental element) of facilitating tax evasion (including by a client), the firm could itself be criminally liable unless it can show that it has reasonable prevention procedures in place.

For more information, see our practice note on the Criminal Finances Act 2017.


As set out in the introduction to this guidance, solicitors providing tax advice should be aware of their roles and duties in law and regulation as they support people to navigate the application of tax law and practice in a complex environment.

We believe that, in doing so, solicitors contribute to an important public good by promoting the rule of law, which in turn supports the integrity and effectiveness of the tax system.

Appendix: aspects of the tax environment to consider

The facts

Tax advice should normally be specific to a client’s facts and circumstances. Any assumptions of fact must be sound and verifiable.

Where relevant, solicitors should also consider any relevant interests of third parties (for example the lender in conveyancing transactions).

Solicitors asked to give generic opinions that do not take into account the position of specific taxpayers should consider whether a matter is too fact-sensitive for such an opinion properly to be given.

If a solicitor is comfortable that a generic opinion can be given, they should make the limitations of that opinion clear, including that the opinion is not given on the basis of the specific facts of those who may enter into the transaction.

Solicitors giving such an opinion should also consider and, where appropriate, warn about the potential risks for third parties who enter into transactions in reliance on the opinion (including a possible warning that the opinion may not be effective protection if HMRC argues that the taxpayer has failed to take reasonable care). It is advisable to give this warning in writing.

The content of tax law

Solicitors should advise based on the legal position, taking into account all rules of interpretation.

Advice on the legal position involves considering all relevant anti-avoidance rules (whether targeted, general, or judicial).

Since 2010, over 100 measures have been introduced to tackle avoidance, evasion and non-compliance, which have significantly expanded the anti-avoidance laws.

A list of those measures is included as Annex A to the government’s policy paper of 13 March 2019, Tackling tax avoidance, evasion and other forms of non-compliance.

Solicitors should also be aware of advance payment notice and follower notices rules that mean those who use tax avoidance schemes may have to make a payment in advance to HMRC before the final tax has been agreed or determined and/or face enhanced penalties.

Understanding the status of HMRC guidance

Elected governments set tax policy, Parliament levies taxes by enacting laws for the purpose, and the courts interpret those laws.

HMRC is the body established by statute in the UK with the responsibility of administering the tax system.

As part of its role, HMRC publishes internal guidance provided to tax inspectors which sets out HMRC’s view on the meaning of legislation.

Solicitors should be aware that HMRC’s views on the meaning of legislation in its guidance do not have legal force and they should advise clients accordingly. HMRC guidance can be valuable in providing insight into HMRC’s view of particular provisions.

Taxpayers are free to challenge the views put forward by HMRC in its guidance, but equally they may face considerable hurdles in relying on statements made in guidance if HMRC decides not to apply it in a particular case (which could include where HMRC subsequently changes its view).

HMRC clearances

It is possible for taxpayers to apply to HMRC for clearances in some cases. Several tax statutes provide that taxpayers can apply for statutory clearance under them (for example on demergers and share exchanges).

Taxpayers may in some cases be able to apply for non-statutory clearance from HMRC where there is material uncertainty as to how tax law applies to a particular transaction.

A taxpayer’s ability to rely on HMRC clearances depends on a number of factors including, importantly, the openness of the taxpayer in the application about all the relevant facts and issues.

The approach of the courts in interpreting tax legislation

The courts do not take a blinkered view of the law or the facts in coming to decisions on tax.

Tax advice should be based on a realistic assessment of the facts and a credible view of the law.

There are many examples of the courts using purposive principles of construction – applying the legislation read purposively and taking a realistic view of the facts (Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684). This has particularly been followed to defeat tax avoidance arrangements.

The General Anti-Abuse Rule (GAAR)

In the Finance Act 2013, Parliament enacted the GAAR, which was designed to counteract tax avoidance.

An arrangement will be caught by the GAAR if it goes beyond anything which could “reasonably be regarded as a reasonable course of action” in relation to the relevant tax provisions.

A tax avoidance transaction that ultimately fails because of the GAAR is not illegal, provided that it does not involve dishonesty or concealment, but may result in a higher level of civil penalties for the taxpayer (for example additional penalties have been enacted for transactions that are counteracted under the GAAR).

Disclosure rules

The Disclosure of Tax Avoidance Schemes (DOTAS) rules (and equivalent rules for VAT, national insurance and SDLT) were introduced by the Finance Act 2004 and since then they have been successively expanded.

These rules require disclosure of prescribed information to HMRC in relation to certain tax arrangements.

Special rules apply where legal professional privilege prevents solicitors from providing all or part of the prescribed information to HMRC.

In these circumstances, the solicitor’s client (rather than the solicitor) is obliged to disclose the scheme.

In addition, EU Directive 2018/822 (DAC6) introduces disclosure and reporting rules for intermediaries involved in designing and promoting certain cross-border arrangements that have certain features.

Again, it is likely that a solicitor who is an intermediary will be precluded from making a disclosure because of legal professional privilege, but the solicitor is likely instead to need to notify either other intermediaries or the solicitor's client of their disclosure obligations under the rules.

The requirements for tax return declarations

When a taxpayer submits a tax return, it must contain a declaration that it is “to the best of his knowledge correct and complete”.

Where the correct interpretation of the tax rules is unclear, the taxpayer is entitled to take a position that they believe to be correct in their return (and to add further disclosure to explain the uncertainty and the view taken).

To avoid civil penalties, taxpayers must take “reasonable care” in arriving at that belief.

Legislation in Schedule 24 of the Finance Act 2007 makes it more difficult to rely on professional advice as a reasonable care defence in certain cases. See HMRC’s Compliance Handbook CH81122.

A taxpayer who submits a return that they do not believe to be correct, and without adequate disclosure, may risk substantial additional civil penalties, and in the worst case may be committing a criminal offence.

A client may instruct a solicitor to act on their behalf in relation to dealings with HMRC (including tax returns).

Solicitors who wish to deal with HMRC on a client’s behalf must have formal authorisation to do so.

They should also note HMRC’s published Standard for Agents expectations as discussed in the guidance.

The ‘Enablers’ rules

Schedule 16 of the Finance (No.2) Act 2017 introduced an enhanced penalties regime.

In certain circumstances, this means that 'enablers' who design, market or facilitate abusive tax avoidance transactions that are defeated by HMRC may be exposed to penalties that relate to the fees earned for those services or may be publicly named.

See the associated guidance produced by HMRC.

Other resources

Other important resources include the SRA Standards and Regulations and related guidance and resources.

HMRC’s internal guidance and other materials are useful on a wide variety of aspects of the state of the tax environment.

The HMRC Standard for Agents sets out its expectations of individuals and businesses that professionally represent or advise taxpayers.

Seven other professional bodies, including the Chartered Institute of Taxation and the Society of Trust and Estate Practitioners, have developed a standard called Professional Conduct in Relation to Taxation (PCRT). This was last substantively revised in 2017.

Some solicitors are members of one of the seven bodies that have subscribed to the PCRT. For those members, our guidance explains the relation between the legal and regulatory obligations of solicitors and the PCRT rules.

In March 2020, the government issued a call for evidence on raising standards in the tax advice market. In that context, it is as important as ever that the high standards that apply to solicitors are well understood.

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