As we enter the year of the snake, one is reminded of the old Chinese curse: "may you live in interesting times". Tax professionals have probably been in the limelight more in the last 18 months than they have been for many years. There have been many ugly headlines about tax avoidance (and evasion), and much public debate as to whether an appropriate tax burden has been assumed by those entities and individuals who have employed aggressive tax planning strategies and participated in aggressive schemes. What should be permissible, in public perception at least, seems now not only to be an issue concerning compliance with the legislation, but also what is morally acceptable.

It is not the place of this article to comment upon particular schemes. Rather, set out below are some thoughts on how professional advisers who have been involved in aggressive tax planning and the promotion of tax avoidance schemes might properly respond to concerns which they have, or which clients might air with them.

Perhaps the starting point is to reaffirm that the Courts do not generally expect advisers to guarantee that a tax planning strategy scheme will achieve its intended outcome. Generally, what the Courts do expect is that the tax practitioner will, when providing advice, exercise reasonable skill and care. If a tax saving is not achieved because the adviser failed to act with the appropriate level of skill and care, then a Court may hold that the adviser is liable for the loss suffered by their client provided the lapse caused the loss in question. Whilst inevitably all matters are viewed with hindsight, the practitioner will be judged by the standards of professionalism prevailing when the advice was given, and by reference to the information available, or which the practitioner ought to have required be made available, at the time. Tax practitioners should also be aware, for a successful claim to be made by a client who faces greater liabilities than they anticipated, the client will have to show that any losses, including additional tax liabilities a client faces were caused by the tax practitioner's negligent advice. Causation, in this context, is a question of what the law regards or treats as causative and can be very complex. However, it is far from axiomatic that a negligent practitioner will be liable, for example, for the tax the client did not expect to pay.

In some cases, where those who may have suffered loss are not the client, but perhaps beneficiaries under an estate, then the right of such persons to claim compensation is less clear. In the case of Daniels v. Thompson, the Court of Appeal held that the personal representative of a deceased's estate had no claim against the deceased's former tax advisers, because the estate had suffered no loss. However, this reasoning has not subsequently been followed in other cases (for example, Rind v. Theodore Goddard and Vinton v Fladgate Fielder). A disappointed beneficiary might be able to bring a claim against a professional adviser for the loss they have suffered, relying on principles set out in the case of White v. Jones.

If practitioners have concerns about the adequacy of the advice they have given, be that by reference to things that the practitioner believes they should have taken into account when providing their advice, or because of the current environment, then they should, at an early stage, consider their position under their professional indemnity insurance arrangements. Many policies require professionals to notify insurers, without delay, not only about claims, but also about the awareness of circumstances which may give rise to a claim. Whilst practitioners may consider that they have done nothing wrong, the question of whether reporting requirements are triggered needs to be carefully considered and a one eyed view avoided. If practitioners have any doubt as to whether an obligation to notify their insurers has arisen they would be well advised to review the position with their insurance brokers. Insurers are experienced in dealing with such concerns and issues, and they also have recourse, where necessary and appropriate, to specialist legal advisers.

As importantly, if a tax practitioner is approached by a client or former client who has concerns, then careful consideration needs to be given to the situation before advising the client further. Not only should the professional indemnity insurance position be considered, but advisers should also avoid temptation to provide immediate reassurance, particularly concerning matters that they have not reviewed for some time. Previous advice may now require careful review, and even revision, in the light of recent developments surrounding aggressive tax planning schemes and HMRC's attitudes. Practitioners should also consider their professional and regulatory position and whether they have the necessary objectivity to comment on advice they have previously given. Acting and providing advice where there is a conflict of interest can give rise to further problems and give rise to further claims. This is a classic example of a situation where the adviser should proceed with caution, and seek assistance if appropriate from its insurers and, indeed, legal advisers if necessary.

Tax practitioners should also be prepared for a client's initial inquiry to evolve into a complaint or a claim. This is, again, another good reason to involve insurers at an early stage. They will often give very useful advice and guidance. Tax practitioners should also exercise great care in relation to the creation of documents that may become relevant to a dispute in the future. Early legal advice can assist tax practitioners to create a privileged environment, allowing an opportunity for a situation to be carefully analysed and an early view taken as to whether an issue is likely to become a claim, and if so, whether the tax practitioner has an exposure.

There is no visible sign that the public hostility to aggressive tax planning is likely to abate and no doubt HMRC will continue to look at aggressive tax planning very closely. Accordingly, tax practitioners who have given advice, and who have concerns, must consider the steps they take carefully. It is very important, in particular, that practitioners consider their obligations to their insurers, their professional obligations and do not make a potentially difficult situation worse by attempting to go it alone.