Where do you go to for tax advice?
Barristers, solicitors, chartered tax advisors, chartered accountants and chartered certified accountants all provide tax advice, that is to say advice to a taxpayer on what the tax laws say, how they apply to the taxpayer's affairs, what practical steps the taxpayer can take to minimise his tax liability and how he may respond to H M Revenue and Customs enquiries or other potential disputes with the Revenue. This article explains the differences between the professions and important factors to consider when choosing a tax professional.
Other services provided by tax professionals
Which profession a taxpayer chooses to consult for tax advice may depend in part on what other services the professional provides. For example it is common for small limited companies to retain a chartered accountant or chartered certified accountant to maintain the business' books and to draw up the yearly accounts required by Companies House and the Revenue. In this situation the accountant, who is already providing accountancy services to the company, may be the obvious person to provide tax advice since he will already be well aware of the company's financial situation and, indeed, will often draw up the yearly tax returns on behalf of the company.
A taxpayer seeking tax advice on a contract – for example on whether it comes within the IR35 legislation – will usually also be seeking advice on non-tax related matters – whether the contract is legally "watertight" so that he will be paid, or whether it contains unduly wide exclusion clauses which might allow the other party to escape from its obligations. So the obvious choice here would be a solicitor or barrister who can advise on both tax and other aspects.
And a taxpayer who asks his solicitor to draft a Will often seek advice from the solicitor on the Inheritance Tax consequences.
A fundamental principle which has traditionally governed the relationship between a professional and their client is confidentiality. A client seeking advice should ideally be able to tell everything to his professional adviser secure in the knowledge that the adviser will not reveal what he has been told to anyone else, and it is important that the client does give all the facts to the adviser otherwise the professional will not be able to properly advice him. In practice there are two aspects to confidentiality. First there is the legal and professional duty of the adviser not to voluntarily reveal what he has been told by the client – this is the duty of confidentiality. Secondly there is the question of whether the professional adviser can be compelled, against the client's wishes, to reveal what his client has told him or whether he has what is known as "legal professional privilege". All professionals have a duty of confidentiality but only communications between clients and lawyers – solicitors and barristers – are subject to legal professional privilege.
The practical effect of this can be illustrated by an example. If a client seeks advice from a barrister or solicitor about whether he has paid the correct amount of VAT in past years – the barrister or solicitor, if he concludes that tax is owing, will advise the client accordingly but will maintain confidentiality relying on legal professional privilege. If however the client seeks the same advice from another professional such as a chartered accountant and the chartered accountant concludes that VAT is owing and that there has therefore been an innocent mistake in completing the VAT returns (which is a strict liability criminal offence), the accountant will be obliged by Section 330 of the Proceeds of Crime Act 2002 to immediately (and secretly) report the matter to the National Criminal Intelligence Service. The accountant would himself be committing a criminal offence if he did not immediately make a report to NCIS (and would also commit an offence if he told the client that he had made the report – it must be made secretly) because the legal professional privilege exception in s.330(6)(b) does not apply to him.
Training and Specialisation
Chartered Accountants qualify by passing 6 exams (one of which is on tax and the remaining 5 on various aspects of accountancy) set by the Institute of Chartered Accountants in England and Wales (ICAEW), and undertaking between 3 and 5 years practical training working for a firm of accountants. The entry qualification to begin training is 2 A levels although many chartered accountants do in fact have university degrees. Chartered Certified Accountants qualify by passing exams set by the Association of Chartered Certified Accountants (ACCA) which may or may not include a tax paper (at the student's choice) and undertaking at least 3 years practical training. The entry qualification is also 2 A levels.
The practical training requirement is satisfied by working for a firm of accountants and at any given time a firm of accountants will consist of the partners, who are qualified accountants, and employees some of whom will be qualified and some of whom will be unqualified (and perhaps working towards qualification). Employment of unqualified staff is permitted providing their work is supervised by a partner of by a qualified member of staff.
Chartered Tax Advisers qualify by passing exams set by the Chartered Institute of Taxation (CIOT) all of which are on tax. The normal entry qualification is having passed the ICAEW or ACCA exams and although there are now a small number of Chartered Tax Advisers who are not qualified accountants, membership of CIOT has traditionally been seen as an additional, specifically tax qualification, for qualified accountants. In addition to passing the CIOT exams, three years relevant experience (e.g. as an accountant) is necessary for qualification as a Chartered Tax Advisor.
The entry qualification to begin training to become a solicitor is normally a university law degree although those with 2 A levels can follow a longer route to qualification by first qualifying as a legal executive and then going on to qualify as a solicitor. If the university law degree route is chosen then this is followed by a 1 year vocational course followed by 2 years' practical training working for a firm of solicitors (training contract). Like firms of accountants, solicitors' firms will typically consist of two or more partners who are qualified solicitors, and employees some of whom will be qualified solicitors, some training to become solicitors, and also some legal executives and unqualified assistants who have no intention of qualifying as solicitors. Solicitors' training is quite generalist, covering all areas of law.
The entry qualification to begin training as a barrister is a university law degree of at least Upper Second Class Honours level. This is followed by a 1 year vocational course and then 1 year's practical training (pupillage). Barristers are specialists both in the legal functions they carry out and (usually) also in the area or areas of law in which they practise. The vocational training course for barristers covers the functions carried out by barristers - giving legal advice, drafting legal documents, and courtroom advocacy, but in terms of the areas of law covered is still generalist, applying to all areas of law including tax, as barristers do not start to specialise until after they commence pupillage. One of the ways in which barristers differ from accountants and solicitors is that barristers in private practice are all self-employed sole practitioners. Barristers are not permitted to form partnerships and they cannot employ fee-earning staff (whether qualified or unqualified) but must personally carry out all professional work they undertake. A barrister will survive in the early years of practice only if he is sufficiently good to gain a reputation which ensures that solicitors and accountants instruct him with sufficient frequency to produce a reasonable fee income. A large proportion of barristers leave private practice in the first few years because they cannot make a living, many taking up salaried positions as in-house employed lawyers for large companies or public bodies. If a barrister is still in private practice after 5 years it is because he has gained a good reputation in the areas in which he specialises. The fact that barristers are a referral profession being instructed by other professionals (mainly solicitors and accountants) rather than directly by clients, results in specialisation either in one particular area of law such as tax or, more usually, in two or three areas. A barrister may be instructed simply because of his specialist function in, for example, appearing in court, but equally often a barrister will be instructed because the instructing professional requires a specialist in a particular area of law and the more work the barrister receives in his specialist area, the more highly developed his expertise in that area becomes, and the more well-known he becomes amongst the profession thus leading to further work and reinforcing his specialisation.
- Identified by the letters ACA or FCA after their name. Only Chartered Accountants can describe themselves as such but note that anybody can call themselves an "accountant". If you are in any doubt as to whether someone is a Chartered Accountant, check on the Institute's website (see below).
Regulated by the Institute of Chartered Accountants of England and Wales (http://www.icaew.co.uk/)
Have some knowledge of tax (one of the 6 qualifying exam papers is on tax). In practice many chartered accountants are also qualified as Chartered Tax Advisers.
Not covered by Legal Professional Privilege
Chartered Certified Accountants
Identified by the letters ACCA or FCCA after their name. Only Chartered Certified Accountants can describe themselves as such but note that anybody can call themselves an "accountant". If you are in any doubt as to whether someone is a Chartered Certified Accountant, check on the Association's website (see below).
Regulated by the Association of Chartered Certified Accountants (www.acca.co.uk)
Can qualify without sitting a tax exam paper but in practice many chartered accountants are also qualified as Chartered Tax Advisers.
Not covered by Legal Professional Privilege
Chartered Tax Advisors
- Identified by the letters CTA, ATII or FTII after their name. Only Chartered Tax Advisors can describe themselves as such but note that anybody can call themselves a "tax advisor". If you are in any doubt as to whether someone is a Chartered Tax Advisor, check on the Institute's website (see below).
Regulated by the Chartered Institute of Taxation (www.tax.org.uk).
Have extensive knowledge of tax rules. The qualifying examination is purely on tax.
Not covered by Legal Professional Privilege
- Only a solicitor may describe themselves as such but note that anybody can call themselves a "legal consultant". If you are in any doubt as to whether someone is a solicitor, check on the Law Society's website (see below).
Regulated by the Law Society (www.lawsociety.org.uk)
Solicitors are generalist lawyers but frequently instruct barristers on their client's behalf for specialist advice (whether on tax or any other area of law)
Covered by Legal Professional Privilege
- Only a barrister may describe themselves as such but note that anybody can call themselves a "legal consultant". If you are in any doubt as to whether someone is a practising barrister, check on the Bar Council's website (see below).
Regulated by the General Council of the Bar (www.barcouncil.org.uk). Most barristers who specialise in tax are also members of the Revenue Bar Association (www.revenue-bar.org).
Barristers are specialists who are instructed by solicitors and accountants on behalf of their clients. It is not usually appropriate for a client to instruct a barrister directly although a client who does their own accounts and tax returns and has no accountant could instruct a barrister directly for advice on specific matters such as the tax treatment of a particular transaction or regarding a dispute with the Revenue.
Covered by Legal Professional Privilege
Editor's Note: John Antell is a barrister specialising in tax, contractual disputes (particularly those involving IT, engineering or construction) and in company and employment law. Neither the author nor the publisher can be held responsible for any actions undertaken as a result of the opinions expressed in this article which are necessarily of a general nature and cannot be a substitute for individual legal advice on your own particular situation.
© John Antell 2005