In Hossein Mehjoo v Harben Barker [2014] EWCA Civ 358 the Court of Appeal held that an accountant was not negligent for failing to advise his client on the use of a tax planning scheme involving Bearer Warrant Shares (BWS).

  • Mr Mehjoo (M) was an Iranian political refugee who had known his advisers for over twenty five years. His domicile was uncertain in that he could have become UK domiciled by choice.
  • He sold his UK business and made a substantial capital gain and paid tax.
  • At that time a non-dom tax specialist from one of the largest firms of accountants might have recommended a scheme which involved the use of BWS to avoid capital gains tax. 
  • Harben Barker (HB) offered him a different type of scheme created by Montpellier - a capital loss scheme. This did not work.
  • BWS planning was curtailed by HMRC in a later year.
  • M claimed that his advisers should have considered tax planning appropriate to his non-domicled status such as the BWS scheme.

The High Court allowed M's appeal, and his advisers appealled.

The Court of Appeal agreed that:

  • Measures such BWS which enabled the change of UK situs assets were not something that reasonably competent generalist accountants would have been aware of at that time.
  • Although Mr Mejhoo was probably non-UK-domiciled he would not have had the benefit of any of the tax advantages of a non-dom because his shares were UK situs assets.
  • It was not insignificant that none of the other firms of specialist tax advisers (including Montpellier) whom Mr Mehjoo subsequently consulted suggested that he should consult a non-dom specialist or raised the possibility of using a scheme like the BWS. 

The court held that HB were not negligent in not taking specialist advice or failing to advise him on the use of a tax scheme.


Mr Mehjoo may not be too happy with the decision. In talking amongst professionals from larger firms today there is some debate as to whether BWS were risk-free and Mr Mehjoo might have ended up with more problems with a resultant offshore trust. In the previous High Court hearing the judge, who was not a tax expert, made cavalier, if not quite sweeping remarks about the different tax avoidance schemes on offer at the time; it seems that professional firms may now rest assured that they will not be deemed negligent if they fail to mention tax schemes. Given the present government's clamp down on abusive tax avoidance schemes and scheme promoters that is a welcome result to this case.

Going forward tax planning around a business sale or purchase is rarely straightforward for the reason that the terms of any deal may vary and it depends on who you are, what you are selling or buying and the entities involved. It is generally to everyone's advantage to plan ahead so in an ideal world you know your tax position before you sell or buy. If in any doubt take a second opinion, "phone a friend" on our Virtual Tax Partner support line.


Hossein Mehjoo v Harben Barker [2014] EWCA Civ 358