I would be a terrible lawyer in practice. Far too much of my time is spent thinking about the way that things ought to be and why they are the way they are. The most important thing for a client and a court however is what the law is. To this end, whilst there is an interesting argument to be had about whether there ought to be confidentiality surrounding individuals or corporations tax affairs, and one which I indeed pondered in the case of politicians’ tax returns, it is not disputed that HMRC’s duty of confidentiality does indeed exist. It arises at common law and is enshrined in section 18 of the Commissioners for Revenue and Customs Act 2005 (‘CRCA 2005’). The central issue in the case of Ingenious Media, the judgment of which was handed down by the Supreme Court last Wednesday, was the scope of this duty.
The facts of the case are brief. On 14 June 2012, two journalists from The Times had a background briefing on tax avoidance schemes with Mr David Hartnett, Permanent Secretary for Tax at HMRC. It was explicitly agreed that this meeting was “off the record”, which Mr Hartnett understood to mean that nothing would be published. During this meeting, Mr Hartnett expressed views about film schemes. On 21 June 2012, some of what was said at the briefing was published in a Times article as coming from a “senior Revenue official”. The article included statements that Mr McKenna had “never left my radar”, that “he’s a big risk for us” that “we would like to recover lots of tax relief he’s generated for himself and for other people” and that “we’ll clean up on film schemes over the next few years”. Did these disclosures amount to a breach of HMRC’s duty of confidentiality enshrined in section 18 of the Commissioners for Revenue and Customs Act 2005?
The Supreme Court unanimously held that they did, thereby overturning the decision of the Court of Appeal (which in turn had followed the decision on the matter in the High Court). I have blogged about the case previously (here, here and here) and it is subject to a lengthy case note of mine to be published hopefully early in the new year. For that reason, I wish to highlight here only one aspect of the decision (which is only briefly touched upon in the case note), namely the defence that was run by HMRC and which found favour in both the High Court and Court of Appeal.
HMRC argued that there was no breach of the duty of confidentiality owed under CRCA 2005, s. 18 by reason of the fact that the disclosure of information pursued a ‘function’ of HMRC. s. 18(2)(a)(i) does indeed provide that there will not be a breach of the duty where the disclosure of confidential information ‘is made for the purposes of a function of the Revenue and Custom’. As the collection and management of taxes is a function of HMRC, HMRC are entitled to disclose confidential information if it is considered that this will help to fulfill this function (through fostering good relations with the press and making the populace aware of its attitude to tax avoidance for instance). This argument mirrors that which the Public Accounts Committee put to Anthony Inglese, then General Solicitor and Counsel for HMRC, during a hearing on 7 November 2011, as signposted by Judith Knott, albeit in the context of pursuing HMRC’s function to assist Parliament. That was the hearing at which Inglese was notoriously made to swear an oath. The pretext to that controversial occurrence, which then head of the Civil Service Gus O’Donnell called a “theatrical exercise in public humiliation”, was a disagreement between Inglese and the Public Accounts Committee as to the scope of legal professional privilege and the duty of confidentiality (see Ev 39-44 of the report). In respect of the latter, the Committee was arguing that there was no statutory bar to the disclosure of confidential taxpayer information where it would assist Parliament, but that it fell within the discretion of HMRC and that HMRC’s refusal to exercise it in favour of disclosure was based upon policy, not law (see pages 5, 9 and Qs 491-Q526 for instance). Inglese was contending meanwhile that he could not disclose taxpayer specific (identifying) information (Q509 for instance). Richard Bacon MP from the Committee took him back through the relevant provisions of the legislation and asserted that there was nothing in the legislation which differentiated between identifying and non-identifying information, and so there was nothing by statute absolutely precluding HMRC from disclosing taxpayer identifying information:
“It is fairly clear to me, reading the legislation, that there are lots of circumstances in which disclosure is possible. That is plain on the face of the Act. Basically, section 18, which you have referred to a couple of times, says in subsection (1): “Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.” Subsection (2) then states: “But subsection (1) does not apply to a disclosure”, and it lists paragraphs (a), (b), (c), (d), (e), (f), (g) and (h) as exemptions to the rule that information may not be disclosed. So there are lots and lots of cases just under section 18 in which one can disclose information. The Act goes on to say in section 20 that “Disclosure is in accordance” with section 20 “if”—and it then gives a whole load of possible examples, one of which is disclosure “to a person exercising public functions”. Lots of things are plain on the face of the Act, with regard to why disclosure may, in certain circumstances, be allowable…[I am led to believe] that there is nowhere in the statute that draws a distinction between identifying and nonidentifying. Is it correct that nowhere is a distinction drawn? I do not know why you are getting all these notes from people behind you; you are supposed to be the general counsel for HMRC. You are the top dog in the legal area; in so far as one has legal dogs, you are the top one, so why you have these people woofing behind you I am not clear. You are the one who should be advising them, frankly. Is what Mr Barclay was pursuing correct? Is there no statutory definition that distinguishes between non-identifying and identifying? Is that correct?”
Inglese’s attempted response to this question was that s. 18(2)(a)(i) needed to be interpreted by reference to its context and purpose (but he was interrupted in the course of doing so).
In a nutshell, the Supreme Court in Ingenious agreed with Inglese’s interpretation. Lord Toulson held that:
“In passing the 2005 Act, Parliament cannot be supposed to have envisaged that by section 18(2)(a)(i) it was authorising HMRC officials to discuss its views of individual taxpayers in off the record discussions, whenever officials thought that this would be expedient for some collateral purpose connected with its functions, such as developing HMRC’s relations with the press…[that] would have significantly emasculated the primary duty of confidentiality”
The Supreme Court went on to provide that the circumstances in which s. 18(2)(a)(i) could be used to disclose taxpayer information to the media would be very limited:
“The whole idea of HMRC officials supplying confidential information about individuals to the media on a non-attributable basis is, or should be, a matter of serious concern. I would not seek to lay down a rule that it can never be justified, because “never say never” is a generally sound maxim. It is possible, for example, to imagine a case where HMRC officials might be engaged in an anti-smuggling operation which might be in danger of being wrecked by journalistic investigations and where for operational reasons HMRC might judge it necessary to take the press into its confidence, but such cases should be exceptional.”
The Public Accounts Committee might well argue that if this is the way that the law is, restricting heavily the ability for HMRC to make disclosures, then the law ought to be amended. As I said, there is an interesting debate to be had about this. However, it is not the way that the law currently is, and the Supreme Court judgment serves to vindicate Anthony Inglese’s stance. He was put in the particularly unenviable of being asked to affirm that he could disclose information on which the legal advice was that this would be a breach of CRCA 2005, s. 18 (something which in turn s. 19 makes a criminal offence in the absence of reasonable belief as to lawfulness).
Well, I say it is a vindication, but looking back through the transcripts of the hearing, I can’t help but feel very sorry for the man (on his first ever appearance before a select committee). If it is a vindication, it is a bittersweet vindication.