Chris Thorpe looks at the differing services which a solicitor and accountant can offer for tax planning.
The divide between solicitors and accountants has been getting fuzzier over the last 20-30 years; it is certainly not a new question.
Solicitors carry out those legal activities which are regulated and which require specialist training and experience. Tax advice and accountancy are not regulated – anyone can do it and there is no requirement to have a practicing licence or offer those services. There are chartered institutes for accountants and tax advisers who clearly distinguish themselves, and no one can call themselves a ‘chartered’ accountant/tax adviser without certification. However, anyone can call themselves a plain old accountant or tax adviser.
But assuming for the sake of this article that your accountant is chartered, what is it they cannot do which a solicitor can?
As far as tax advice is concerned, there is no difference. Both can, and do, offer that. Solicitors would tend to specialise in the ‘tax planning’ side – succession/retirement planning, inheritance tax, trusts, business restructuring, transactions etc; whereas accountants would be largely confined to ‘tax compliance’ – tax returns, accounts, employment/PAYE matters etc.
These divides are getting old now though; for some time there have been solicitors who offer accountancy and tax return services; and many accountants offer just as good tax, trust and succession planning as any solicitor. Financial planning is the other battlefield – many solicitors and accountants have financial advisers within their ranks to supplement their core services.
Preparing documents etc.
Solicitors have traditionally had the advantage over accountants because they are more highly regulated and have been able to offer ‘reserved legal activities’, which include litigation, rights of audience in court and drafting of certain documents; whereas accountants’ unregulated activities can be carried out by solicitors without hindrance.
Some inroads have been made into the solicitors’ bastion by accountants – since 2014, the ICAEW has been able to offer non-contentious probate services, and in 2019 it was announced they would be able to regulate the swearing of oaths. Whilst it is unlikely that accountants will be able to conduct litigation and appear in court any time soon, there are some other regulated activities that accountants might possibly be able to do one day, especially ‘paperwork’ type activities. One of those is drafting deeds. A deed is a special type of contract which can only be executed by certain approved bodies – which currently does not include the ICAEW, ICAS or ACCA.
A trust deed can only be drafted by a lawyer, even though many accountants are well established within the trusts and inheritance tax planning world; but a dividend waiver is also a deed and that is far more relevant to accountants’ bread-and-butter work. It would make sense to allow accountants to draft deeds as they form a big part of their practice. It is also odd when you consider that drafting a will, within a solicitor’s traditional remit, is not regulated at all (even though getting that wrong can have dire consequences!).
Another area in which lawyers triumph over accountants is professional privilege. All communications between lawyer and client are hallowed and confidential under all circumstances.
However, accountants’ communications have to be disclosed if (say) HMRC were to demand them. Only in litigation proceedings can an accountant claim privilege. There is undoubtedly an inequality of arms as far as the two professions are concerned, even though both offer tax advice.
The merging of the accountancy and legal professions is slow-moving, but it is moving, nonetheless. In 20 years’ time, it is unlikely there will even be separate accountancy and legal firms. Whilst at the moment there is that inequality of arms between the professions, as far as tax planning is concerned, most accountants are as good as any solicitor.