Britain's business leaders will be sent advice on Monday from a top law firm warning them they cannot claim it is their fiduciary duty to shareholders to avoid tax. Farrer & Co was commissioned to look at the issue by tax justice commissioners who fear executives are trying to justify tax avoidance on the grounds that their priority is to enhance shareholder returns.

The legal assessment from Farrer & Co, which numbers the Queen among its clients, states: "It is not possible to construe a director's duty to promote the success of the company as constituting a positive duty to avoid tax."

Farrer says company directors have a wide discretion when calculating the social impact of their decisions. If they choose to pay tax responsibly, they would in fact be protected by the applicable law rather than at risk of liability, it explains.

The Tax Justice Network will dispatch a copy of the legal opinion to the heads of every company in the FTSE-100 index.

"This opinion should make a real difference to company directors who are being told by their tax advisers that they have a duty to adopt anti-social tax measures," said John Christensen, director of the network.

"Legal risk in this area turns out to be a complete fiction, and company directors can stand firm and act according to their consciences rather than being swayed by what is effectively sales puff coming out of the tax avoidance industry."

The issue became a hot potato in political circles after rows over the amount of duty paid by companies such as Amazon and Google. Reuters news agency recently reported moves by G20 nations to tighten fiscal rules, saying, "analysts in the investment community say corporate executives have a duty to shareholders to minimise their companies' tax bills".

David Quentin, a tax barrister who was involved in drafting the legal opinion, said companies were sometimes pursuing self-interest. "Board-level executives often benefit from performance-related reward packages which are indirectly affected by the amount of tax the company pays. Corporate tax avoidance is presented as a matter of high-minded 'fiduciary' duty, but it is probably better understood as being about personal reward," he argued.

The advice from Farrer has been welcomed by corporate governance experts. Alan MacDougall, managing director of the pension investment adviser PIRC, said it was a very helpful clarification of directors' duties and confirmed his organisation's view that it was mistaken to argue that there is a legal obligation on directors to minimise the tax companies pay.

"Indeed in the current corporate environment aggressive tax avoidance has the potential to cause significant reputational brand damage, which could be detrimental …to companies and their shareholders over the long-term. We hope that directors, and their advisers, take careful note of this opinion. It is no longer acceptable for them to seek to justify tax avoidance through a misinterpretation of directors' duties," he added.