A senior HMRC official gave Times journalists an “off the record” briefing about tax avoidance and discussed the tax affairs of Patrick McKenna and Ingenious Media, who had promoted film investment schemes. The Supreme Court held that this breached HMRC’s statutory duty of confidentiality. Officials may disclose taxpayer information only so far as is reasonably necessary for collecting and managing revenue; press relations, and a hope that journalists might later volunteer useful information, were not enough.
Patrick McKenna, founder and chief executive of Ingenious Media Holdings plc, had devised film investment schemes that used tax relief then available. Ingenious Media and its subsidiaries promoted those schemes until the relief ended. On 14 June 2012 David Hartnett, HMRC’s Permanent Secretary for Tax, met two financial journalists from The Times who wanted to discuss tax avoidance. The interview was recorded and agreed to be “off the record”.
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The Times later published articles drawing on the briefing and identifying Mr McKenna. At the time of the briefing, HMRC had not decided whether to challenge the schemes.
It was not disputed that Mr Hartnett passed on information about the tax activities of Mr McKenna and Ingenious Media, and about HMRC’s attitude towards them, drawn from information HMRC held. He said that good relations with the financial press were in HMRC’s interests, that the press could help communicate HMRC’s views on elaborate avoidance, and that the journalists might know of arrangements HMRC had not uncovered. He did not expect his comments to be published.
The claim and the courts below
Mr McKenna and Ingenious Media sought judicial review, although the substance of the claim was breach of a duty of confidentiality. Sales J treated Mr Hartnett’s decision as an administrative act. He held that the court was not the primary decision-maker and could intervene only if it was irrational to think that the interview would assist tax collection. Given the limited disclosures and the off-the-record arrangement, he found the decision rational, legitimate and proportionate, and dismissed the claim.
The Court of Appeal upheld the dismissal of the claim. It treated the justification for disclosure primarily as a matter for HMRC’s judgment.
The statutory duty
Section 18(1) provides that Revenue and Customs officials may not disclose information held in connection with an HMRC function. Section 18(2) lists exceptions. The relevant one is a disclosure made for the purposes of an HMRC function which does not contravene a restriction imposed by the Commissioners. Other exceptions cover specified public-interest disclosures, civil and criminal proceedings, court orders and consent. Section 19 makes an unlawful disclosure relating to an identifiable person a criminal offence, with a defence where the official reasonably believed the disclosure was lawful or that the information had already been lawfully made public.
HMRC’s core function, under section 5, is the collection and management of revenue. Section 9 adds ancillary powers to do anything the Commissioners think necessary, expedient, incidental or conducive to their functions. HMRC argued that, read together, these provisions allowed disclosure of anything officials considered expedient in connection with revenue collection.
How the exception was read
Lord Toulson, with whom Lady Hale, Lord Mance, Lord Kerr and Lord Reed agreed, said that taxpayer confidentiality did not begin with the 2005 Act. Where a public body receives personal or confidential information under a legal power or public duty, it generally may not use that information for other purposes. HMRC receives information about a person’s financial affairs so that it can assess and collect, or pay, what is properly due. Lord Toulson recalled Lord Wilberforce’s statement that confidentiality between the revenue and the taxpayer is vital to the tax system. A statute can override that duty, but it must do so explicitly.
HMRC’s broad reading would make several specific exceptions unnecessary and would allow vague words to erode a fundamental protection. Lord Toulson applied the principle that general or ambiguous language is not taken to override basic individual rights unless that result is clear. Parliament, he held, cannot be supposed to have authorised officials to discuss individual taxpayers in off-the-record conversations whenever that seemed useful for a collateral purpose such as press relations. Section 18(1) reflects the ordinary duty of confidentiality. The exception permits disclosure only to the extent reasonably necessary for HMRC’s primary function.
HMRC also argued that section 18 cannot be concerned only with truly confidential information, because section 19 provides a defence where information was already lawfully public. The Court of Appeal accepted that argument. Lord Toulson did not. Information can be available to the public without losing all confidentiality, and a criminal-law defence for a reasonable belief does not show that Parliament gave officials a wide discretion to disclose confidential taxpayer affairs. He left open whether section 18(1) itself has the very wide reach HMRC suggested.
Who decides whether confidentiality was breached
The Supreme Court held that the lower courts asked the wrong question. Whether a duty of confidentiality has been broken is ordinarily for the court, applying established principles to its own assessment of the facts. Public-law ideas of rationality do not occupy the whole field merely because the person concerned holds public office. Lord Toulson illustrated the point with W v Egdell, where the Court of Appeal held that a doctor’s disclosure of a psychiatric report was justified, but that the answer depended on the court’s ruling rather than on what the doctor thought. The same approach applies to HMRC unless statute provides otherwise. Section 18(2)(a)(i) did not make disclosure a matter of official discretion controlled only by rationality.
The off-the-record arrangement
“Off the record” can mean different things. Sales J found that Mr Hartnett understood the interview as a background briefing, intended to influence what the journalists wrote but not itself to be published. There was no appeal against that finding, but Lord Toulson said that the precise shade of meaning did not matter. Confidential information may sometimes lawfully be passed to a limited class of people who need it. An impermissible disclosure does not become permissible because the recipient is asked to keep it confidential.
Why the justifications failed
The information was confidential and, although limited, not insignificant: the articles showed the use made of it. The schemes themselves were in the past, while their tax consequences were still under consideration. It was not suggested that the disclosures were reasonably necessary for HMRC’s investigations. A general wish to maintain good media relations, or to publicise HMRC’s views about elaborate avoidance, could not justify discussion of identifiable taxpayers. The possibility that the journalists might reveal unknown schemes was speculation and too tenuous to justify the disclosure. Nor was Mr Hartnett’s belief that his comments would not be reported a justification.
Lord Toulson described the supply of confidential taxpayer information to the media on a non-attributable basis as a matter of serious concern. He declined to say that it could never be justified. An exceptional operational case might arise — for example, an anti-smuggling operation at risk from journalistic investigation — but such cases should be exceptional. This was not one of them.
Verdict: The Court unanimously allowed the appeal. HMRC had not justified disclosing the confidential taxpayer information under section 18(2)(a). The parties were invited to make submissions on the form of order.
Source: R (Ingenious Media Holdings plc and another) v HMRC [2016] UKSC 54
