hmrc-2In a post on 26 July 2016, I wrote about three curiosities arising from Part 5 of the Digital Economy Bill which provides for the sharing of information in government.  There is however one further important curiosity relating to Part 5 of the Bill concerning information held by HMRC and arising from a case recently before the Supreme Court, R (Ingenious Media and Anr) v HMRC

The background to the Ingenious Media case was an “off the record” briefing given in 2012 by Dave Hartnett, the then Permanent Secretary of the HMRC, to two journalists from The Times.  In the course of the interview, Mr Hartnett said some highly disparaging things about Ingenious Media, whose business includes the promotion of film investment partnerships, and its Chief Executive, Patrick McKenna – describing Mr McKenna in particular as being on their “radar“, a “threat” and a “big risk“ and the film partnerships as “scams for scumbags”.

This was despite the fact that Ingenious Media has been engaging with HMRC for many years about the partnerships and HMRC had yet to issue any formal closure notices to Ingenious Media regarding partnerships, giving its definitive view about the tax consequences of them. When later it issued the notices, Ingenious Media sued HMRC in the Tax Tribunal.

The journalists duly published the descriptions of Mr McKenna (but not the film partnerships) in their newspaper.  Ever since, Ingenious Media and Mr McKenna have been trying to establish that it was unlawful for Mr Hartnett to speak about them to journalists in this way.

The law relating to disclosures of information by HMRC is currently set out in section 18 of the Commissioners for Revenue and Customs Act 2005 (the “2005 Act“).  This provides that HMRC officials may not disclose information which is held by HMRC in connection with one of their functions (which would include all information held in relation to taxpayers).

However, there are a number of exceptions including where the disclosure “is made for the purposes of [an HMRC] function“.  The question in the Ingenious Media case was thus whether the disclosure of this material regarding Ingenious Media and Mr McKenna to journalists was properly for the purposes of a function of HMRC.

The principles behind section 18 have a very long history.  When income tax was first introduced during the Napoleonic wars, the Prime Minister, Pitt the Younger, underlined the protection which would be given to information provided by taxpayers in relation to the new tax saying:

With respect to the information which may be communicated to the commissioners, I should propose that they shall be strictly sworn not to disclose such information, nor to avail themselves of it for any other purpose separate from the execution of the act.

Since then the importance given to the protection of such information has been repeatedly emphasised by Parliament and even during the passage of the 2005 Act, Lord Goldsmith, the Attorney-General, reassured Lord Kingsland that the ambit of permissible disclosures of taxpayers information by HMRC under section 18 was narrow.

Notwithstanding this history, in Ingenious Media, HMRC have always contended that section 18 conferred a broad discretion on its officers to disclose information including revealing information specifically relating to taxpayers to journalists.  They said in particular that it was permissible to disclose taxpayers’ information if it was with a view to obtaining other useful information (to trade it in effect) or with a view to improving the reputation of HMRC with the public.

Although this appeared to be wholly at odds with the history referred to above, HMRC’s view about their broad power to disclose taxpayers’ information was supported by Mr Justice Sales at first instance and by the Court of Appeal.

The hearing before the Supreme Court took place on 4 July 2016.  By coincidence, the very next day the Digital Economy Bill was published.  At clause 64, this provides as follows.

64 Disclosure of non-identifying information by HMRC

(1)  A Revenue and Customs official may disclose to any person information held by the Revenue and Customs in connection with a function of the Revenue and Customs if—

(a)  the information is non-identifying information, and

(b) the official thinks that the disclosure would be in the public interest.

In this provision “non-identifying information” is information which is not “identifying information” which in turn is information which relates to a person (including a corporate entity) whose identity:

  • is specified in the information;
  • can be deduced from the information; or
  • can be deduced from the information taken together with any other information.

So under this provision an HMRC official would be able to disclose any information held by HMRC provided it did not identify a taxpayer and he or she thought there was a public interest in doing do.

This is curious because section 20 of the 2005 Act already allows for a range of public interest disclosures and on the case advanced by HMRC at the Supreme Court (that the powers of officers in relation to disclosure of information were very broad indeed) clause 64 would appear to be wholly superfluous.

On the position adopted by HMRC in the Ingenious case it is entitled to disclose both non-identifying and identifying taxpayer information whenever it believes that this is necessary for the purpose of a function – which would include all the “public interest” disclosures which clause 64 seeks to permit.

As I explained in my previous post, Part 5 of the Bill appears to proceed on the basis that there are pre-existing general strict prohibitions on the sharing and disclosure of information by public authorities but at the Supreme Court, HMRC argued that even in respect of taxpayers’ information, the prohibitions were very light indeed.

However, if section 18 of the 2005 Act is construed narrowly by the Supreme Court as Ingenious Media contended, clause 64 of the Bill will help establish a relatively sensible regime.  Taxpayer identifying information will be stringently protected but HMRC officials will be free to disclose non-identifying information where they believe there is a public interest in doing so.

By contrast, if HMRC succeed at the Supreme Court, clause 64 will be meaningless and taxpayer identifying information will remain insecure in the hands of HMRC despite 200 years of Parliamentary reassurance to the contrary.

Dan Tench is a partner in the Litigation Department at Olswang LLP.  Olswang acted for the Claimants in Ingenious Media.