In Alastair Graham Knights, Evergreen Trees and Shrubs Limited and Knights Investment Management Limited v Townsend Harrison Ltd [2021] EWHC 2563, the High Court (HC) adjudged that an accounting firm neither had nor had breached, a duty of care when providing introductions to providers of tax avoidance schemes.

  • Alastair Graham Knights, Evergreen Trees and Shrubs Limited and Knights Investment Management Limited (the Claimants) were introduced to tax scheme and investment promoters by Townsend Harrison Ltd (THL), their accountants.
  • THL was not authorised by the Financial Services Authority and was not permitted to recommend particular investments.
  • THL was authorised by the Institute of Chartered Accountants in England and Wales (ICAEW) to provide advice on investments in general and to refer clients to third parties.
  • These facts were communicated to and understood by the claimants through engagement and limitation of liability letters.
  • The tax schemes failed and led to additional tax liabilities. One foreign exchange trading investment resulted in the majority of the funds invested being lost.
  • The claimants alleged that THL owed them a duty of care which they breached by introducing them to the tax scheme promoters ultimately causing them to suffer a loss.

The HC dismissed the claims finding that:

  • THL had no advisory duty of care in respect of the tax schemes as:
    • The engagement letters provided by THL to the claimants made it clear that it could not recommend specific investments and it was unauthorised to do so.
    • Limitation of liability letters were provided by THL to the claimants which confirmed no tax advice was being given on the effectiveness of the tax schemes and deferred that advice to the scheme promoters.
    • There were no clear agreed terms covering any due diligence that the claimants alleged that THL was to undertake.
    • Correspondence from the claimants confirmed their understanding that it was not THL’s position to give advice on the schemes and that they understood the consequences of the investments being made.
    • The claimants did receive tax advice from the tax scheme promoters which pointed against THL being subject to an advisory duty of care.
    • The considerable delay between the advice being received, the tax schemes failing and the claim did not support the assertation that the claimants had relied on THL’s advice.
  • Even if there had been a duty of care owed by THL in respect of the tax schemes, the HC was not convinced that the claimants would not have entered into the tax schemes anyway, with or without the advice that was alleged.
  • The claimants were experienced businessmen and sophisticated investors and it was not inappropriate to be introducing them to promoters.
  • Had there been a duty of care breached, the losses would have arrived from that breach of duty.
  • Any loss suffered would have needed to reflect the difference between the tax charge resulting from the failed tax scheme and that which would have otherwise occurred (including taxation on funds extracted).


Firms that have received commissions from introducing clients to promoters of tax schemes will want to read this case in detail.

While this case was certainly a positive outcome for THL, the result did rest on its facts. A lot of the alleged advice was undocumented and the judge put little weight on submissions by both the claimants and defendants due to the passage of time.

Useful guides on this topic

Tax avoidance schemes
How do you spot tax avoidance schemes? What are the types of schemes available that should be avoided? What disclosure requirements are there? When are tax clearances needed?

Disguised remuneration
What is disguised remuneration? What is the loan charge? When does the loan charge apply? Will the loan charge affect me?

External links

Alastair Graham Knights, Evergreen Trees and Shrubs Limited and Knights Investment Management Limited v Townsend Harrison Ltd EWHC 2563


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