On 16 May 2002 the House of Lords handed down its important judgment in the Morgan Grenfell case. The Inland Revenue had issued section 20 notices on the taxpayer requiring it to produce documents which constituted communications between it and its legal advisors. A basic principle of English law is that such communications are privileged from compulsory disclosure to a third party. The principle is subject to certain statutory inroads in criminal matters. The Revenue sought to argue that tax statute had also – by necessary implication from certain words – excluded legal professional privilege in tax matters.

The law lords upheld the taxpayer’s common law right to legal professional privilege. This constitutes a decision of real practical importance to many taxpayers. The Revenue consistently demands to see privileged documents and, until this decision, there was no firm basis for rejecting such demands.

However, the Morgan Grenfell decision is of less significance to BW MDP clients. A BW MDP principle notes: “Particularly in pensions matters, our firm pursues an ‘open book’ policy with the Revenue. We believe that it is in our client’s best interests to be able to demonstrate the complete propriety of their actions. So, we ask our clients to waive legal professional privilege. This allows us to invite the Revenue to conduct an annual audit of our client files. This enables the Revenue to see all the original documents – including our legal strategy advice – and so to understand the fully compliant nature of the strategy.”