After strong protests from accountants and tax advisers, Stephen Dorrell, the Financial Secretary to the Treasury, agreed late on Thursday to drop clause 241 of the Finance Bill for further consultation.
The Treasury acknowledged that accountants and tax advisers had raised 'quite a lot of problems' with the clause, and said Mr Dorrell planned to look again at the issue - in 1995.
Earlier this week the Institute of Taxation said the clause was so widely drafted that 'all the Inland Revenue need allege is that it believes the adviser has given them information - on any one of his clients - that he might reasonably have thought was wrong.'
The institute was supported in its campaign against the clause by the accountancy bodies, the law societies of England and Wales and of Scotland and by the Revenue Bar Association.
Malcolm Gammie, president of the institute, said before the clause reached committee stage on Thursday night that it was poorly drafted and provided inadequate safeguards for taxpayers' privacy and rights to confidential advice. Faced with a barrage of opposition from the entire tax advice profession, the Treasury retreated at the last minute.Reuse content