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Supreme Court holds that HMRC owes duty of confidence to taxpayers

The Supreme Court has overturned decisions from the High Court and Court of Appeal and held that the disclosure of a taxpayer's affairs to the press by HMRC was a breach of the latter's duty of confidence to that taxpayer.

R (on the application of Ingenious Media Holdings plc and another v Commissioners for Her Majesty's Revenue and Customs [2016] UKSC 54]

The Supreme Court has overturned decisions from the High Court and Court of Appeal and held that the disclosure of a taxpayer's affairs to the press by HMRC was a breach of the latter's duty of confidence to that taxpayer.


In June 2012 the Permanent Secretary of Tax in HMRC, Mr David Hartnett, gave an interview to The Times about tax avoidance. Mr Hartnett understood that the interview was 'off the record' and his comments would not be published. Mr Hartnett specifically discussed the issue of film schemes as a means of tax avoidance and mentioned Mr Patrick McKenna, the CEO of Ingenious Media Holdings plc. Ingenious Media had in the past promoted film investment schemes devised by Mr McKenna to utilise certain tax relief which was available at the time. In the interview, Mr Harnett stated that Mr McKenna represented "a threat" and the film schemes had enabled investors to avoid at least £5 billion in tax. The comments by Mr Hartnett were published by the The Times with the article stating that the quotes came directly from a "senior Revenue official".

Ingenious Media and Mr McKenna brought a claim against HMRC by way of application for judicial review. The Claimants' case was that their tax affairs were confidential and should not have been disclosed to The Times journalists.

There was no dispute that Mr Hartnett had given the information to the journalists, although Mr Harnett had not anticipated that his comments would be published as it had been agreed that the interview was off the record. HMRC stated that the purpose of the interview given by Mr Hartnett was that it was in HMRC's interests to establish good relations with the financial press as it provided a way of emphasising to the public HMRC's views on tax avoidance schemes.

The law

HMRC owes a duty of confidentiality under section 18 of the Commissioners for Revenue and Customs Act 2005 ("the Act"): "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".

However, subsection (2) of s.18 holds that the duty does not apply to a disclosure which "is made for the purposes of a function of the Revenue and Customs". There are further listed exceptions to the duty in further subsections, such as disclosure made for the purposes of a criminal investigation.

The decisions of the lower courts

At first instance Mr Justice Sales held that, on the application of the principles of judicial review, the court could only intervene if satisfied that Mr Hartnett could not rationally take the view that speaking to the journalists would assist in the exercise of its tax collection functions. In Sales J's view, the disclosures were not irrational, were made for a legitimate purpose and were proportionate. The Court of Appeal upheld the first instance decision and rejected the Claimants' argument that the disclosure was not "in connection with a function" of HMRC pursuant to the general exception in s.18(2) of the Act. It also rejected the Claimants' argument that it was not for the court to review the facts as if it were the primary decision maker – it was only concerned with whether Mr Hartnett's decision was rational.

The Supreme Court's decision

Giving the lead judgment, Lord Justice Toulson held that the lower courts had been looking at the issue through the wrong end of the telescope. They had approached the matter strictly as one of judicial review, i.e. a review on public law principles of an administrative act. This was not the correct approach as it failed to take into consideration the common law duty of confidentiality.

It is a well-established principle of the law of confidentiality that where information of a personal or confidential nature is obtained or received in the exercise of a legal power or in furtherance of a public duty, the recipient will in general owe a duty to the person from whom it was received or to whom it relates not to use it for other purposes (known as the Marcel principle following Marcel v Commissioner of Police of the Metropolis [1992] Ch225).

The Marcel principle could, nevertheless, be overridden by statutory provisions, such as those in the Act. However, the exception in the Act that disclosures could be made "for the purposes of a function" of the HMRC almost entirely eroded the confidentiality duty owed to taxpayers by its sheer vagueness. Toulson LJ stated that the exception was so broad it rendered further specific listed exceptions in the Act (such as permitting disclosure for criminal proceedings) otiose. To construe the general exception so broadly would be contrary to the principle of legality whereby fundamental rights cannot be overridden by ambiguous words (as per R v Secretary of State for the Home office, ex parte Simms [2000] 2 AC 115).

The Supreme Court held that such a general exception which would authorise HMRC officials to discuss its views about taxpayers with the press for some collateral purpose connected with its functions (such as developing its relationship with the press) could not have been the intention of Parliament when drafting the Act. If the discretion of HMRC was only limited by the rationality test, rather than the common law principles of confidence, the primary duty of confidence in s.18 of the Act would be rendered almost meaningless.

It followed that if the disclosure of information about taxpayers was subject to ordinary common law confidentiality principles, not the rationality control, the court could approach the disclosures made by Mr Hartnett as if it was the primary decision maker. Therefore, the question as to whether HMRC had breached confidentiality was one for the court's judgment.

The Supreme Court held that the information disclosed was confidential in nature and HMRC owed a duty of confidence under s.18 of the Act. Disclosure was impermissible and it was no less impermissible merely because the information had been passed on in confidence or 'off the record'. That Mr Hartnett did not anticipate his comments being reported was no justification for making them.


This case illustrated a complex relationship between statutory duties and the common law, but affirmed the importance of the common law principle of confidentiality vis-à-vis public bodies. If a public body intends to disclose potentially confidential information it may only do so if there is a clear statutory exception or whether the disclosure is permissible pursuant to the common law principles of confidentiality, such as the information already being in the public domain. Fundamentally, and as put by Lord Justice Toulson, "public bodies are not immune from the ordinary application of the common law, including in this case the law of confidentiality".

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