A formal legal opinion stating that company directors have no fiduciary duty to avoid tax is unlikely to have far-reaching consequences for advisers, according to sector experts.


On the contrary, failing to conduct legitimate tax planning may itself be a breach, the Gazette has been told.


Earlier this week anti-avoidance activist body the Tax Justice Network wrote to the chief executives of the FTSE 100 drawing their attention to the opinion, prepared by Farrer & Co. It states that although directors are obliged to promote the success of the company, ‘this should not be misunderstood as requiring blinkered attention solely to maximising distributable profits’. The opinion goes on to explain that directors have a wide discretion to act ‘with a view to the social impact of their decisions, and if they chose to pay tax responsibly rather than structure around tax they would be protected by the applicable law rather than at risk of liability’.

Chartered accountant Patrick Stevens, acting head of tax policy and immediate past-president of the Chartered Institute of Taxation, believes the opinion is unlikely to lead to sea change in corporate behaviour or greatly affect how tax planning experts advise their clients.


He said: ‘I would be surprised if it makes a material difference, the principles are already well understood anyway. Of course, if someone said it is your fiduciary duty to avoid tax, that’s absurd. But [a director’s] fiduciary duty is to look after their company as well as they can, taking numerous factors into account when considering how it should conduct its affairs. If you deliberately chose not to carry out legitimate tax planning that that could conceivably be a breach. The question remains, where do you draw the line?’


Bradley Phillips, tax partner at Herbert Smith Freehills and chair of the City of London Law Society’s revenue law committee, agreed. ‘I am not sure that companies actually seek to justify tax planning in this way,’ he said. ‘Whether there is a fiduciary duty is not the right question: the directors should manage the company in a way that makes sense from a business perspective and that could involve tax planning. The difficult question to answer is what constitutes “reasonable tax planning”.’