Divorce lawyers must report any suspicions of tax evasion by their clients to the police, no matter how small the sum - but they are allowed to advise that they have done so in certain cases, the High Court has ruled.

In P v P [2003] EWHC Fam 2260, Dame Elizabeth Butler-Sloss confirmed that solicitors must report any suspicion of irregularity to the National Criminal Intelligence Service (NCIS).

Failure to do so could result in prosecution under the Proceeds of Crime Act 2002, which carries a maximum 14-year prison sentence.

Whether the funds in question amount to 10 or 1 million is irrelevant as far as the Act is concerned, she said.

The judge acknowledged that the reporting requirements on solicitors could lead to 'serious consequential delays' to court proceedings.

NCIS has seven days in which to respond to a report from a solicitor.

If it does not react in that time, court proceedings may continue, but a client's funds could still be subject to a seizure by the authorities.

However, Dame Butler-Sloss confirmed that family solicitors are able to inform their clients of their actions.

Former chairman of the Law Society family law committee, Peter Watson-Lee said: 'The Act was being interpreted very rigidly by police, who were saying that it would be a criminal offence for solicitors to let their clients know that they had reported them.

'Fortunately, Dame Butler-Sloss has made it clear that this interpretation is a nonsense.

In family law, there is an enhanced duty of full disclosure to the clients.

In practice, this paves the way for allowing a discussion with the client.'

Dame Butler-Sloss said best practice would be to wait a certain time period, which could be from seven to 38 days, before disclosing to the client that a report had been made.

A spokeswoman for the Law Society, which was consulted by Dame Butler-Sloss prior to judgment, stressed that the ruling will not apply in all cases: 'The application of the judgment may be restricted to those types of cases which impose certain professional duties upon solicitors and their clients to make full disclosure, as in ancillary relief cases, but may not apply to other types of cases handled by solicitors.'

By Rachel Rothwell