Ingenious Media Holdings plc & Anor, R (on the application of) v Revenue and Customs [2016] UKSC 54

HMRC's Permanent Secretary for Tax discussed Mr McKenna's tax affairs with Times journalists in an 'off the record' interview. The Supreme Court held this breached HMRC's statutory duty of confidentiality under section 18 of the Commissioners for Revenue and Customs Act 2005.

Facts

Mr Patrick McKenna is the founder and chief executive of Ingenious Media Holdings plc, an investment group that promoted film investment schemes utilising tax reliefs which were available at the time. On 14 June 2012, Mr David Hartnett, then Permanent Secretary for Tax at HMRC, gave an ‘off the record’ interview to two financial journalists from The Times to discuss tax avoidance. The interview was recorded.

On 21 June 2012, The Times published articles identifying Mr McKenna as one of the two main providers of film investment schemes in the UK, quoting a ‘senior Revenue official’ (Mr Hartnett) describing Mr McKenna as ‘an urbane man… a clever guy… a big risk for us’ and indicating HMRC’s intent to recover tax relief. Mr Hartnett also provided a £5 billion figure attributable to film schemes and described them privately as ‘scams for scumbags’.

Mr Hartnett’s reasons for the disclosures included fostering good relations with the financial press, publicising HMRC’s views on tax avoidance schemes, and obtaining information from the journalists about other schemes. He emphasised that he had not anticipated his comments about Mr McKenna would be published.

Issues

The appeal raised three principal issues:

1. The proper construction of section 18(2)(a)(i) of the Commissioners for Revenue and Customs Act 2005, in particular the meaning of disclosure ‘made for the purposes of a function of the Revenue and Customs’.
2. The proper approach of the court in reviewing Mr Hartnett’s conduct – whether on judicial review rationality principles or as primary decision-maker applying confidentiality principles.
3. The significance of the interview being agreed to be ‘off the record’.

Arguments

Appellants

The appellants argued that the disclosures were not ‘in connection with a function’ of HMRC properly construed, and that the lower courts had adopted the wrong standard of review. The disclosures breached HMRC’s duty of confidentiality.

Respondent (HMRC)

HMRC argued that, reading sections 5, 9 and 51(2) of the 2005 Act together, section 18(2)(a)(i) covered anything HMRC viewed as necessary, expedient, incidental or conducive to its revenue collection functions. HMRC relied on section 19’s statutory defence (where information was already lawfully in the public domain) to argue section 18 was not confined to truly confidential information, so the exception should be similarly broad. The proper standard of review was rationality.

Judgment

The Supreme Court (Lord Toulson giving the leading judgment, with Lady Hale, Lord Mance, Lord Kerr and Lord Reed agreeing) unanimously allowed the appeal.

The Marcel principle and statutory confidentiality

Lord Toulson held that the courts below had not adequately considered the common law of confidentiality. The duty owed by HMRC reflects the well-established Marcel principle (from Marcel v Commissioner of Police of the Metropolis [1992] Ch 225) that where information of a personal or confidential nature is obtained in the exercise of a legal power or public duty, the recipient owes a duty not to use it for other purposes. The court cited Lord Wilberforce in R v Inland Revenue Comrs, Ex p National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, that

‘the whole system… involves that… matters relating to income tax are between the commissioners and the taxpayer concerned’

and that

‘total confidentiality of assessments and of negotiations between individuals and the revenue is a vital element in the working of the system’

.

Interpretation of section 18(2)(a)(i)

The court rejected HMRC’s expansive interpretation. Adopting the principle of legality articulated by Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, Lord Toulson observed:

‘Fundamental rights cannot be overridden by general or ambiguous words. This is because there is too great a risk that the full implications of their unqualified meaning may have passed unnoticed in the democratic process. In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.’

Lord Toulson added that the more general the words, the harder it is to rebut the presumption. Parliament cannot have intended to authorise HMRC officials to discuss individual taxpayers in off-the-record discussions whenever expedient for collateral purposes such as developing press relations. Section 18(2)(a)(i) must be interpreted narrowly, permitting disclosure only to the extent reasonably necessary for HMRC to fulfil its primary function.

The standard of review

The court held that ordinarily it is for the court to decide whether there has been a breach of confidentiality, applying established legal principles to its own judgment of the facts. Citing W v Egdell [1990] 1 Ch 359, the question turns not on what the public official thinks but on what the court rules. Lord Toulson emphasised that public bodies are not immune from the ordinary application of the common law: it is ‘a cardinal error’ to suppose that public law judicial review principles occupy the entire field whenever a public body is involved.

‘Off the record’

The court held nothing turned on Mr Hartnett’s understanding of ‘off the record’. An impermissible disclosure of confidential information is no less impermissible because passed on in confidence – ‘every schoolchild knows that this is how secrets get passed on’.

Application to the facts

The information disclosed was confidential and not insignificant. The disclosures were not reasonably necessary for HMRC’s investigations into the film schemes. A general desire to foster media relations or publicise views on tax avoidance could not justify discussing individual taxpayers’ affairs with journalists. The suggestion that journalists might reveal unknown schemes was mere speculation and far too tenuous to justify disclosure.

Implications

The decision affirms and strengthens the duty of confidentiality owed by HMRC to individual taxpayers under section 18 of the 2005 Act, restricting any internal exception to disclosures reasonably necessary for HMRC’s primary revenue collection and management function.

The judgment reinforces the principle of legality: broadly worded statutory exceptions to fundamental rights, including the right to confidentiality of personal information held by public authorities, must be construed narrowly. The more general the statutory words, the stronger the presumption that Parliament did not intend to override fundamental rights.

Importantly, the case clarifies that where a public body’s conduct is challenged on grounds amounting to a breach of confidentiality, the court applies ordinary common law principles and acts as primary decision-maker – it does not confine itself to rationality review merely because the defendant is a public body. This has significance for litigants challenging the conduct of public authorities in fields where private law duties (such as confidentiality) overlap with statutory functions.

The decision serves as a warning to officials in revenue and other regulatory authorities: discussing identifiable taxpayers’ affairs with journalists, even on a non-attributable or ‘off the record’ basis, will generally constitute a breach of confidentiality. Lord Toulson declined to rule that such disclosures could never be justified, recognising the possibility of exceptional operational circumstances (such as an anti-smuggling operation), but stressed these should be exceptional.

The decision is important to taxpayers, to public bodies holding sensitive information, and to journalists, in clarifying the legal limits on official disclosures of confidential information acquired through statutory powers.

Verdict: Appeal allowed. The Supreme Court held that Mr Hartnett’s disclosures to The Times journalists about Mr McKenna and Ingenious Media were not justified under section 18(2)(a) of the Commissioners for Revenue and Customs Act 2005 and constituted a breach of HMRC’s statutory duty of confidentiality. The parties were invited to make written submissions on the appropriate form of order.

Source: Ingenious Media Holdings plc & Anor, R (on the application of) v Revenue and Customs [2016] UKSC 54