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Tax

Solicitor-client privilege does not extend to accountant files

Although communications between tax lawyers and their clients are subject to solicitor-client privilege, the files of accountants can be seized by the taxman and form part of a tax evasion prosecution — including notes of meetings or conversations, says Canadian tax lawyer David J. Rotfleisch, the Financial Post reports.

This difference, says the Post article, was recently highlighted when the Canada Revenue Agency (CRA), acting on the basis of a search warrant, reportedly seized records from accounting firm Grant Thornton in Halifax, relating to allegations that a client had committed offences under the Income Tax Act.

“Although the accountants had not been accused of any offences or implicated in any wrongdoing nevertheless a search warrant allows CRA to take files of any accounting clients named in the search warrant,” Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation, writes in a recent client bulletin, the Post reports.

“CRA would normally execute simultaneous search warrants at the home and business premises of the taxpayer, and would seize any computers found. This can cause a disruption in the business operations of the taxpayer.”

However, says the article, communications between tax lawyers and their clients or any files and documents relating to or prepared for the client cannot be seized by the CRA.

At the same time, if a lawyer retains the accountant on behalf of the taxpayer, accountants can take advantage of that privilege, says the Post.

“It’s important that first the tax lawyer be retained, and then the tax lawyer can enter into a written retainer with the accountant,” writes Rotfleisch.

“In this way the files and correspondence of the accountant will enjoy the benefit of the solicitor-client privilege and will not be subject to seizure by CRA.”

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