Solicitor loses privilege battle over HMRC seizure in fraud case

Mark Reid argued legal privilege over seized files, but the court ruled HMRC’s fraud probe justified

A Birmingham solicitor accused of tax fraud has lost his legal bid to stop HM Revenue & Customs (HMRC) from using seized material, after a High Court judge ruled that the crime-fraud exception to legal professional privilege applied.

Mr Justice Foxton, presiding over the case, held that the legal threshold for the exception was met in relation to documents taken from Mark Reid, the principal at Reid & Co, during Operation Ginseng — an investigation into suspected abuse of the loan charge rules introduced by the 2017 Finance Act.

The seizure took place in February 2020, with Mr Reid and four others later charged in May 2024 with conspiracy to cheat the public revenue. Their trial is scheduled for March 2027.

Mr Reid, a solicitor since 1993, had argued that the documents were subject to legal professional privilege (LPP), and should be returned. But the judge disagreed.

According to HMRC’s case, Reid used the introduction of the loan charge — designed to clamp down on disguised remuneration schemes — as a “commercial opportunity”. His firm promoted a scheme involving a company called Pyrrhus Capital Ltd (PCL), which issued loans to contractors before the loan charge came into effect, allegedly allowing them to avoid tax.

Foxton J outlined HMRC’s allegation: that the PCL loans were falsely represented as independent, commercial arrangements rather than part of a tax avoidance structure. In doing so, the scheme allegedly encouraged users to submit inaccurate self-assessment tax returns, declaring they were not liable for the loan charge, when both they and the scheme promoters knew otherwise.

Though no findings of fact were made, Foxton J emphasised that he relied on written evidence only, given the ongoing criminal case — he concluded, on the balance of probabilities, that the crime-fraud exception (CFE) applied.

This exception means that legal advice or documentation cannot be protected by privilege if it was given or used in furtherance of a crime or fraud, even when a solicitor is involved.

“I am satisfied that the CFE exception to legal professional privilege is engaged here,” said Foxton J, referencing a confidential annexe outlining more detailed allegations. He reiterated that this did not amount to a finding of guilt, as that would be for a jury in the 2027 trial to determine.

Mr Reid and the other defendants remain presumed innocent, but the High Court’s ruling marks a significant blow to their legal defence strategy, allowing HMRC to retain and examine the disputed material in its prosecution.