Information notices and legal advice privilege: a law firm keeps most of its documents away from HMRC

Introduction

In Hogan Lovells Cadwalader International LLP v HMRC [2026] UKFTT 01502 (TC), the First-tier Tribunal (Tax Chamber) (the “FTT”) decided whether three internal documents could be withheld from HMRC under a Schedule 36 Finance Act 2008 information notice on the grounds of legal advice privilege. The taxpayer, Hogan Lovells Cadwalader International LLP, formerly Hogan Lovells International LLP (“HLI”), largely succeeded. Two of the three documents were held to be privileged in full, and the third need only be disclosed in redacted form.

The decision is a rare and detailed example of the Tribunal using its jurisdiction under the Information Notice: Resolution of Disputes as to Privileged Communications Regulations 2009 (the “Regulations”). It will be of real interest to any business whose in-house lawyers advise on tax matters, and to advisers dealing with HMRC information requests.

 

Background

HLI and Hogan Lovells US LLP (“HLUS”) combined in 2009 under a Cooperation Agreement. A persistent “imbalance issue” later arose about partner remuneration and payments between the two firms. Between 2012 and 2014 there were discussions about possible solutions, including the admission of a corporate entity as a partner of HLI and, eventually, payments by HLI to HLUS.

HMRC opened an enquiry into HLI’s partnership return for 2014/15 on 12 May 2016. HMRC’s enquiries into the returns for 2014/15 to 2023/24 concerned the deductibility of the payments made by HLI to HLUS. Thereafter, HMRC issued Schedule 36 information notices. HLI disclosed a large amount of material, but withheld three documents (the “Disputed Documents”): slides prepared by a tax partner, Philip Gershuny (the “PG Slides”); a “Corporate Member Executive Summary”; and a “February Paper”. The last two were prepared by Prentiss Feagles, a US-qualified tax lawyer at HLUS who also served as Co-Head of Finance.

HMRC first challenged the privilege claimed over two of the documents (the PG Slides and the February Paper) on 15 December 2021, and the dispute rumbled on for some years before HLI applied to the Tribunal on 6 February 2026.

 

The Legislation

The Tribunal summarised the procedure under the Regulations as follows:

“Pursuant to the Regulations, where a dispute as to the status of documents meeting the description prescribed in a Sch 36 information notice arises through correspondence, Regulation 5 prescribes a staged procedure for resolution of the dispute. The recipient of the information notice identifies the documents claimed to be privileged, HMRC identifies those it maintains are not privileged, and the disputed documents are then referred to the Tribunal. The Tribunal receives the disputed documents themselves and determines their status.” [14]

As to the Tribunal’s task:

“Regulation 8 defines the Tribunal’s task. I must determine whether, and to what extent, the documents are privileged and may determine that only part of a document is privileged. I may also direct which parts, if any, are to be disclosed.” [15]

 

The issues

HMRC argued that none of the documents were privileged, because they were produced in a commercial and managerial context rather than a legal one. In the alternative, HMRC argued that any privilege had been lost when the documents were shared between HLI and HLUS, whose interests were not aligned, and that any non-privileged material should be severed and disclosed.

The Tribunal therefore had to decide, for each document, a) whether it was prepared by a lawyer acting as a lawyer; b) whether its dominant purpose was legal advice;  c) whether confidentiality was preserved; and d) whether any parts could be severed.

 

In the FTT

Having analysed the legal authorities, the FTT said:

“Accordingly, I conclude that a document will not attract legal advice privilege merely because it was influenced by legal advice or was produced in circumstances where legal advice had previously been obtained. Equally, privilege is not confined to documents which expressly repeat or summarise legal advice. A document may attract privilege where its disclosure would provide a definite and reasonable basis for inferring the substance of privileged legal advice previously given. The question is whether disclosure would reveal the advice itself, whether directly or by necessary and reasonable inference. It is not sufficient that disclosure would do no more than suggest that legal advice had been received or allow the reader to speculate as to its content.” [33]

The Judge also had some difficulty finding one of the authorities relied on by HLI (Recovery Partners GP Limited v Rukhadze), and, having located it, found that the passages relied upon did not support HLI’s proposition. The Tribunal said:

“I note that in a paper determination, where the parties rely on authorities without oral elaboration, it is particularly important that the relevant authorities are accurately cited and made available to the Tribunal.” [29]

 

Witness evidence

HLI asked the Tribunal to treat the evidence of its General Counsel, Mr Atkins, as largely determinative. The Tribunal declined:

“The views of a witness as to whether a document constitutes legal advice, forms part of a privileged continuum of communications or otherwise attracts privilege are not conclusions which I am bound to accept. Those are matters which I must determine for myself having regard to all of the evidence before me.” [40]

 

Legal or commercial?

HMRC pointed out that many of the contemporaneous emails described the issues as “commercial”. The Tribunal was not persuaded that this was decisive:

“In my view, the imbalance issue was simultaneously a contractual, tax, regulatory, governance and commercial problem. The contractual, tax, regulatory and governance aspects of the problem represented matters of pure law, the commercial problem formed a part of the wider context in which the legal aspects arose. I am satisfied that none of the aspects can realistically be separated from the others. The fact that many participants described particular issues or potential solutions as “commercial” does not demonstrate that the contractual, tax, regulatory or governance dimensions were incidental.” [85]

“That conclusion does not determine the status of any particular document. Each document must still be shown to constitute, record, convey or reveal advice falling within the relevant legal context.” [86]

 

Confidentiality

HMRC argued that sharing the documents between two firms with diverging financial interests meant confidentiality was lost, particularly as there was no express confidentiality agreement or marking. The Tribunal disagreed, relying on the sensitivity of the issue, the small group of recipients and the limited purpose of circulation:

“In those circumstances, I consider it appropriate to infer that the recipients of the Disputed Documents all and each understood that they were being provided to them for that limited purpose and on a basis that preserved their confidentiality as against those not involved in the process. The absence of an express confidentiality agreement, confidentiality marking or documented policy does not materially detract from that conclusion.” [89]

Overall conclusion

All three documents were found to have been prepared by a lawyer acting as a lawyer, for the dominant purpose of legal advice, and confidentiality had not been lost. On the February Paper, which HMRC said merely recorded a “collective” commercial position, the Tribunal said:

“The content and structure are, in my view, far more consistent with a document prepared for the purpose of communicating and evaluating legal advice within the relevant legal context than with a document whose dominant purpose was merely to record a commercial agreement between the parties.” [100(2)]

 

The Corporate Member Executive Summary and the February Paper were therefore privileged and need not be disclosed. The PG Slides contained some limited factual material that could be severed. The Tribunal redacted the legal advice herself and directed disclosure of the redacted copy, but not before the time limit for seeking permission to appeal has expired, with disclosure stayed if an application for permission is made.

 

Effect of the decision

This is a welcome decision for taxpayers. It confirms that advice from in-house lawyers who also hold management roles can attract privilege, that HMRC cannot defeat privilege simply by pointing to the word “commercial” in contemporaneous emails, and that confidentiality can be inferred without formal markings. Equally, the Tribunal will decide privilege for itself by examining the documents: a general counsel’s assurance is not enough, and factual material will be severed where possible.

Practitioners will need to be aware that privilege claims in response to Schedule 36 notices should be made carefully and document by document, supported by evidence of who wrote each document, in what capacity and why. Businesses would be wise to mark sensitive legal advice as privileged and confidential and to keep its circulation tight. As this case also shows, accurate citation of authority matters.